A regime-switching approach for Bank interest rate and foreign exchange risk management
碩士 === 國立暨南國際大學 === 財務金融學系 === 98 === This paper investigates the dynamic portfolio hedging effectiveness of US banks when expose to both risks of interest rate and currency. There are few studies focus on bank’s hedging effectiveness under portfolio effect and regime switching effect. This paper tr...
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| Format: | Others |
| Language: | zh-TW |
| Published: |
2010
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| Online Access: | http://ndltd.ncl.edu.tw/handle/62862964338036905778 |
| Summary: | 碩士 === 國立暨南國際大學 === 財務金融學系 === 98 === This paper investigates the dynamic portfolio hedging effectiveness of US banks when expose to both risks of interest rate and currency. There are few studies focus on bank’s hedging effectiveness under portfolio effect and regime switching effect. This paper tries to fill this literature gap by applying a Multivariate Markov Switching Dynamic Conditional Correlation GARCH (MS-DCC GARCH) model to investigate if taking account of both effects improves bank’s hedging effectiveness. Empirical results show that portfolio hedging is superior to separate hedging out-of-sample in terms of both return maximization and risk minimization. The hedging performance is further improved when we incorporate the regime switching effect. This shows the importance of incorporating both effects of portfolio and regime switching for bank while constructing hedging strategies to hedge both interest rate and currency risks.
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