|
|
Article: Interest rate derivatives and asset-liability management by commercial banks.
- Article from:
- New England Economic Review
- Article date:
- January 1, 1995
- Author:
CopyrightCOPYRIGHT 1995 Federal Reserve Bank of Boston. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
|
Bank participation in derivative markets has risen sharply in recent years. The total amount of interest rate, currency, commodity, and equity contracts at U.S. commercial and savings banks soared from $6.8 trillion in 1990 to $11.9 trillion in 1993, an increase of 75 percent. A major concern facing policymakers and bank regulators today is the possibility that the rising use of derivatives has increased the riskiness of individual banks and of the banking system as a whole.
Banks have long used one type of derivative instrument, namely interest rate futures, to manage interest rate risk (Koppenhaver 1986; Booth, Smith, and Stoltz 1984; Parkinson and Spindt 1986; ...