HEDGING INTEREST RATE RISK OF CROATIAN BANKS WITH DERIVATIVE PRODUCTS

Croatian banks are exposed to many forms of market risks. One of the most relevant is the exposure to the interest rate risk. Hedging interest rates risk exposure in every banking sector is not an easy task. It can be done by on-balance sheet or by off-balance sheet instruments. On-balance sheet str...

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Bibliographic Details
Published in:Ekonomska istraživanja 2011-03, Vol.24 (1), p.384
Main Authors: Prga, Ivica, Sverko, Ivan
Format: Article
Language:English
Subjects:
Balance sheets
Banking
Banking industry
Banks
Derivatives
Economic theory
Hedging
Influence
Interest income
Interest rates
Markets
Profitability
Profits
Risk exposure
Risk management
Studies
Yield curve
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Summary:Croatian banks are exposed to many forms of market risks. One of the most relevant is the exposure to the interest rate risk. Hedging interest rates risk exposure in every banking sector is not an easy task. It can be done by on-balance sheet or by off-balance sheet instruments. On-balance sheet strategies are mainly less complicated ones but harder for implementation. On the other hand side, off-balance sheet strategies require the high development of derivative markets. One can conclude that usage of off-balance sheet instruments for the purpose if interest rate risk management in Croatian banks is still is the beginning phase. All of the used instruments are plain-vanilla ones. However, knowing the speed of financial industry development one can expect the usage of more off-balance sheet instruments in Croatian banking industry in the nearer future.
ISSN:1331-677X
1848-9664