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Impact of interest rate risk on the Spanish banking sector

In: Mathematical and Statistical Methods for Actuarial Sciences and Finance

Author

Listed:
  • Laura Ballester

    (University of Castilla — La Mancha, Department of Economic Analysis and Finance)

  • Román Ferrer

    (University of Castilla — La Mancha, Department of Economic Analysis and Finance)

  • Cristóbal Gonález

    (University of Valencia, Department of Financial Economics)

Abstract

This paper examines the exposure of the Spanish banking sector to interest rate risk. With that aim, a univariate GARCH-M model, which takes into account not only the impact of interest rate changes but also the effect of their volatility on the distribution of bank stock returns, is used. The results show that both changes and volatility of interest rates have a negative and significant impact on the stock returns of the Spanish banking industry. Moreover, there seems to be a direct relationship between the size of banking firms and their degree of interest rate sensitivity.

Suggested Citation

  • Laura Ballester & Román Ferrer & Cristóbal Gonález, 2010. "Impact of interest rate risk on the Spanish banking sector," Springer Books, in: Marco Corazza & Claudio Pizzi (ed.), Mathematical and Statistical Methods for Actuarial Sciences and Finance, pages 1-11, Springer.
    • Handle: RePEc:spr:sprchp:978-88-470-1481-7_1
    DOI: 10.1007/978-88-470-1481-7_1
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