Banks and Derivatives

Gary Gorton and Richard Rosen

No 5100, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In the last ten to fifteen years financial derivative securities have become an important, and controversial, product for commercial banks. The controversy concerns whether the size, complexity, and risks associated with these securities, the difficulties with accurately reporting timely information concerning the value of firms' derivative positions, and the concentration of activity in a small number of firms, has substantially increased the risk of collapse of the world banking system. Despite the widespread attention to derivatives, there has been little systematic analysis. We estimate market values and interest-rate sensitivities of interest rate swap positions of U.S. commercial banks to empirically address the question of whether swap contracts have increased or decreased systematic risk in the U.S. banking system. We find that the banking system as a whole faces little net interest-rate risk from swap portfolios.

JEL-codes: G13 G21 (search for similar items in EconPapers)
Date: 1995-04
Note: AP CF
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (63)

Published as Bernanke, Ben S. and Julio Rotemberg (eds.) NBER Macroeconomics Annual 1995. Cambridge: MIT Press, 1995.
Published as Banks and Derivatives , Gary Gorton, Richard Rosen. in NBER Macroeconomics Annual 1995, Volume 10 , Bernanke and Rotemberg. 1995

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Related works:
Chapter: Banks and Derivatives (1995)
Working Paper: Banks and derivatives (1995)
Working Paper: Banks and Derivatives
Working Paper: Banks and Derivatives
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