An Empirical Analysis of the Motivation of Commercial Banks Holding Financial Derivatives to Hedging Risks

Abstract

As a physical asset that financial derivatives can smooth the interest rate and foreign exchange risk of commercial banks through hedging transactions and provide services for their risk management. However, due to the last start of this application in China, the identification and supervision of risk types and holding motives in the market are still not perfect. Therefore, this paper studied this situation.The paper first analyzes several major development trends and development backgrounds of the financial derivatives market. Then, by summarizing the literature, it makes several relevant hypotheses in the empirical part, aiming at several factors that affect the holding of financial derivatives of commercial banks, and carries out multiple linear regression analysis on the hypotheses. Finally, through the hypothetical conclusions verified by collating the regression results, the paper provides some suggestions for the development of related fields in China.