| Summary: | 碩士 === 國立臺北大學 === 金融與合作經營學系 === 101 === Numerous studies have evaluated the relationship between the financial derivatives and bank risks and have provided inconsistent conclusions. Alternative to the previous literature, we apply Vector Autoregression Model (VAR) to explore the dynamic relationship between financial derivatives and bank risks for 29 Taiwan banks using monthly bank financial data, from January 2006 to December 2012.
Our results suggest that both off-balance-sheet activities and total derivatives activities may reduce bank’s total risks effectively in the long run. If we further examine the dynamic relationships between bank risks and various derivatives activities, including interest trading derivatives activities, exchange trading derivative activities, interest non-trading derivatives activities and exchange non-trading derivatives activities. We find that bank’s exchange risks cannot be reduced effectively through any derivatives activities. Also, all derivatives activities may reduce bank’s interest risks effectively. The interest trading derivatives activities may reduce bank’s credit risks while interest non-trading derivatives activities increase bank’s credit risks. At the end, the interest non-trading derivatives activities may increase bank’s total risks.
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