Derivatives activity by U.S. banks: Impact on risk and profitability.
The primary objective of this study is to analyze and assess the impact of derivatives activity by U.S. Banks on their corresponding profitability and risk. Using quarterly data for the period of 1999 to 2006, our analysis focused on the twenty-five largest commercial U.S. banks. Our results indicate a positive contribution to trading revenue; however, this increase does not lead to an increase in profitability. Further, as derivative use increased, the risk of the banks in our sample increased.
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Sundaram, S. & Willey, T. (2009). Derivatives activity by U.S. banks: Impact on risk and profitability. Indian Journal of Economics and Business, 8, 229-243.
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