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Derivatives holdings and market values of U.S. bank holding companies

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  • Wonho Wilson Choi
  • Jinyong Kim
  • Mingook Kim

Abstract

We examine the impact of derivatives held by US bank holding companies on their market valuations over the period 2000 to 2010. By using bank-level data with detailed information on the notional amounts of derivative positions according to holding purposes and underlying asset types, our regression analyses provide three main findings. First, derivative instruments held for hedging rather than trading purposes contribute to enhancing market values. Second, the positive effects exhibit nonmonotonic patterns indicating that excessive amounts of derivatives holdings deteriorate market values. Third, interest rate derivatives are the main source of high valuations.

Suggested Citation

  • Wonho Wilson Choi & Jinyong Kim & Mingook Kim, 2016. "Derivatives holdings and market values of U.S. bank holding companies," Applied Economics, Taylor & Francis Journals, vol. 48(49), pages 4747-4757, October.
    • Handle: RePEc:taf:applec:v:48:y:2016:i:49:p:4747-4757
    DOI: 10.1080/00036846.2016.1164822
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    References listed on IDEAS

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