Banking Firm, Risk of Investment and Derivatives英文文献资料.docVIP

Technology and Investment, 2011, 2, 222-227 doi:10.4236/ti.2011.23023 Published Online August 2011 (http://www.SciRP.org/journal/ti) Banking Firm, Risk of Investment and Derivatives Udo Broll , Wing-Keung Wong , Mojia Wu 1 2 1 Department of Business and Economics, Technische Universit?t Dresden, Dresden, Germany Department of Economics, Hong Kong Baptist University, Hong Kong, China E-mail: udo.broll@tu-dresden.de, awong@.hk 1 2 Received September 13, 2010; revised May 17, 2011; accepted May 24, 2011 Abstract The economic environment for ?nancial institutions has become increasingly risky. Hence these institutions must ?nd ways to manage risk of which one of the most important forms is credit risk. In this paper we use the mean-variance (mean-standard deviation) approach to examine a banking ?rm investing in risky assets and hedging opportunities. The mean-standard deviation framework can be used because our hedging model satis?es a scale and location condition. The focus of this study is on how credit risk affects optimal bank in- vestment in the loan and deposit market when derivatives are available. Furthermore we explore the rela- tionship among the ?rst- and second-degree stochastic dominance efficient sets and the mean-variance effi- cient set. Keywords: Banking Firm, Investment, Risk, Derivatives, Hedging, (μ, ?)-Preferences, Stochastic Dominance 1. Introduction ?uctuations in risk as in the Asian Financial Crises in 1997, the Russian Financial Crises 1998, the Argentinean Financial Crisis in 2001, Enron crisis in 2002 and the ?nancial crisis in 2007. There are many ways in which ?nancial managers can utilize derivatives. The main ap- plications are hedging, arbitrage and speculation. This paper shall focus on hedging, i.e., the desire of an inves- tor to reduce risks in order to stabilize income and cash?ow streams. The bas