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Determinants of interest rate exposure – A study of Eurozone banks

Jarnér, Markus and Nguyen, Thuy (2011)
Department of Business Administration
Abstract
The purpose of this thesis is to investigate to what extent Eurozone banks are exposed to interest rates risk caused by adverse changes in short-term and long-term interest rates. Moreover, we aim towards determining what characteristics of Eurozone banks that affect their interest rate exposure. A quantitative approach using multiple regression analysis and panel data has been used, with a sample containing 38 listed Eurozone banks during the time period of 2002-2010. Our findings show that Eurozone banks indicate a considerable degree of interest rate exposure, significantly positive with short-term interest rate movements and negative with long-term interest movements. The on-going crisis period of 2007-2010 displays a more intense... (More)
The purpose of this thesis is to investigate to what extent Eurozone banks are exposed to interest rates risk caused by adverse changes in short-term and long-term interest rates. Moreover, we aim towards determining what characteristics of Eurozone banks that affect their interest rate exposure. A quantitative approach using multiple regression analysis and panel data has been used, with a sample containing 38 listed Eurozone banks during the time period of 2002-2010. Our findings show that Eurozone banks indicate a considerable degree of interest rate exposure, significantly positive with short-term interest rate movements and negative with long-term interest movements. The on-going crisis period of 2007-2010 displays a more intense interest rate risk as a consequence of an unstable and volatile interest rate environment. In addition, other than bank capital, other investigated ratios appear to be different as testing against bank interest rate sensitivity to different interest rates. The most interesting finding is regarding the impact of size to banks' interest rate sensitivity, in particular negative to short-term interest rate and positive to long-term interest rate movements. (Less)
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author
Jarnér, Markus and Nguyen, Thuy
supervisor
organization
year
type
H1 - Master's Degree (One Year)
subject
keywords
Interest rate risk, Eurozone, banking industry, stock returns, balance sheet characteristics, Management of enterprises, Företagsledning, management
language
Swedish
id
1978030
date added to LUP
2011-06-01
date last changed
2012-04-02 19:03:45
@misc{1978030,
  abstract     = {The purpose of this thesis is to investigate to what extent Eurozone banks are exposed to interest rates risk caused by adverse changes in short-term and long-term interest rates. Moreover, we aim towards determining what characteristics of Eurozone banks that affect their interest rate exposure. A quantitative approach using multiple regression analysis and panel data has been used, with a sample containing 38 listed Eurozone banks during the time period of 2002-2010. Our findings show that Eurozone banks indicate a considerable degree of interest rate exposure, significantly positive with short-term interest rate movements and negative with long-term interest movements. The on-going crisis period of 2007-2010 displays a more intense interest rate risk as a consequence of an unstable and volatile interest rate environment. In addition, other than bank capital, other investigated ratios appear to be different as testing against bank interest rate sensitivity to different interest rates. The most interesting finding is regarding the impact of size to banks' interest rate sensitivity, in particular negative to short-term interest rate and positive to long-term interest rate movements.},
  author       = {Jarnér, Markus and Nguyen, Thuy},
  keyword      = {Interest rate risk,Eurozone,banking industry,stock returns,balance sheet characteristics,Management of enterprises,Företagsledning, management},
  language     = {swe},
  note         = {Student Paper},
  title        = {Determinants of interest rate exposure – A study of Eurozone banks},
  year         = {2011},
}