The Likelihood and Extent of Bank Participation in Derivatives Activities

Financial Industry Studies Working Paper No. 1-95

Posted: 24 Aug 1998

See all articles by Jeffery Gunther

Jeffery Gunther

Federal Reserve Banks - Federal Reserve Bank of Dallas

Thomas F. Siems

Federal Reserve Bank of Dallas - Research Department

Abstract

Based on annual U.S. bank data covering the period from 1991 through 1994, we use a variant of Cragg's model to investigate empirically both the decision of whether to participate in derivatives activities and, for banks involved in derivatives, the extent of their participation. The results reveal major differences between the determinants of banks' participation in derivatives activities and the factors influencing the extent of their participation. In particular, while not influencing significantly the decision of whether to use derivatives, capitalization is found to enhance the extent of derivatives participation. This finding supports the view that capital regulation effectively ties the extent of derivatives participation to capital adequacy.

JEL Classification: G21, G28, C24

Suggested Citation

Gunther, Jeffery and Siems, Thomas F., The Likelihood and Extent of Bank Participation in Derivatives Activities. Financial Industry Studies Working Paper No. 1-95, Available at SSRN: https://ssrn.com/abstract=6719

Jeffery Gunther

Federal Reserve Banks - Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States

Thomas F. Siems (Contact Author)

Federal Reserve Bank of Dallas - Research Department ( email )

2200 N. Pearl Street
Dallas, TX 75201
United States
214-922-5129 (Phone)
214-922-6076 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
914
PlumX Metrics