IDEAS home Printed from https://ideas.repec.org/p/fth/nystfi/99-074.html
   My bibliography  Save this paper

1998 Survey of Derivatives and Risk Management Practices by U.S. Institutional Investors

Author

Listed:
  • Richard M. Levich
  • Gregory S. Hayt
  • Beth A. Ripston

Abstract

This paper presents the results of a survey of U.S. institutional investors regarding their use of derivative securities and risk management practices. The survey focuses on three categories of institutional investors - pension plan sponsors, college and university endowments, and private foundations. Among many findings, we report that 46% of institutions permit their asset managers to use derivatives. The fraction permitting the use or derivatives ranges from 63% for pension plan sponsors, to 38% among college and university endowments and to 28% for private foundations. Of those institutions that permit derivatives use, only 59% reported open derivatives positions as of year-end 1997. Thus, only 27% of all respondents to the survey reported outstanding derivatives positions. However, other evidence suggests, that this is a conservative estimate of derivatives positions. Where derivatives are used, the positions tend to be small relative to total assets. The modal notional value of derivatives as a percent of assets is 1.0%, while the median value is 5.0%. Risk governance surrounding derivatives at institutional investors appears to be less intensive than at banks and securities dealers. However, the large majority of institutions (80%) place some limitations on the nature or extent of derivatives activity among internal or external managers.

Suggested Citation

  • Richard M. Levich & Gregory S. Hayt & Beth A. Ripston, 1999. "1998 Survey of Derivatives and Risk Management Practices by U.S. Institutional Investors," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-074, New York University, Leonard N. Stern School of Business-.
  • Handle: RePEc:fth:nystfi:99-074
    as

    Download full text from publisher

    File URL: http://www.stern.nyu.edu/fin/workpapers/papers99/wpa99074.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Curcuru, Stephanie E. & Thomas, Charles P. & Warnock, Francis E. & Wongswan, Jon, 2014. "Uncovered Equity Parity and rebalancing in international portfolios," Journal of International Money and Finance, Elsevier, vol. 47(C), pages 86-99.
    2. repec:spr:lnecms:978-3-642-01565-6 is not listed on IDEAS
    3. Ülkü, Numan & Demirci, Ebru, 2012. "Joint dynamics of foreign exchange and stock markets in emerging Europe," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(1), pages 55-86.
    4. repec:eee:reveco:v:57:y:2018:i:c:p:371-401 is not listed on IDEAS
    5. Muhammad Aftab & Karim Bux Shah Syed & Rubi Ahmad & Izlin Ismail, 2016. "Exchange-rate variability and industry trade flows between Malaysia and Japan," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(4), pages 453-478, June.
    6. Ferreira Filipe, Sara, 2012. "Equity order flow and exchange rate dynamics," Journal of Empirical Finance, Elsevier, vol. 19(3), pages 359-381.
    7. Muhammad Aftab & Rubi Ahmad & Izlin Ismail & Mumtaz Ahmed, 2016. "Does exchange-rate uncertainty matter in the Malaysia–E.U. bilateral trade? An industry level investigation," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 43(3), pages 461-485, August.
    8. Ülkü, Numan & Karpova, Yekaterina, 2014. "Do international equity investors rebalance to manage currency exposure? A study of Greece foreign investor flows data," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 150-169.
    9. Caporale, Guglielmo Maria & Menla Ali, Faek & Spagnolo, Nicola, 2015. "Exchange rate uncertainty and international portfolio flows: A multivariate GARCH-in-mean approach," Journal of International Money and Finance, Elsevier, vol. 54(C), pages 70-92.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fth:nystfi:99-074. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel). General contact details of provider: http://edirc.repec.org/data/fdnyuus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.