Analysis On Factors And Effects Of Derivatives Trading At China’s Commercial Banks

Financial derivatives are widely used as a tool for risk mitigation and improvement of income structure in the marketization reform and financial innovation process.However,the use of derivative financial instruments has been controversial for a long time.On the one hand,it can help enterprises to hedge risks and increase income;on the other hand,its high leverage and other characteristics will bring new risks for banks when hedging risks.The impact of derivatives trading on corporate risk,performance and value has been a widespread concern for scholars at home and abroad.With the increase of the scale of China’s commercial bank derivatives market,the impact of derivatives trading on China’s commercial banking industry is also growing,especially in the context of the current completion of China’s interest rate marketization reform and the acceleration of the RMB exchange rate reform process.Faced with interest rate and exchange rate risks,Bank’s risk management needs will be further enhanced,and derivatives trading will become a vital part of China’s commercial banking business now and in the future.In this context,studying the influencing factors of commercial derivatives trading in China’s commercial banks and their impact on bank risk and performance has important practical significance for commercial banks to better develop derivatives business.This paper follows the "background analysis-literature review put forward hypothesis-empirical analysis-put forward conclusions and recommendations" ideas to study.First of all,introduce the background of China’s commercial bank derivatives transactions and the significance of this study.Then according to the“influence factors of derivatives trading","the impact of derivatives trading on company risk" and "the impact of derivatives trading on company performance",the existing literatures are classified and summarized.Combined with the current situation of derivatives trading in China’s commercial banks,this paper proposes the research hypothesis of the factors affecting the derivatives transactions of commercial banks in China and the impact mechanism of derivatives transactions on bank risks and performance.On the basis of theoretical analysis,this paper takes 28 commercial banks in China to carry out derivatives business as the research object,constructs an unbalanced panel model,empirically tests the influencing factors of derivative transactions in China’s commercial banks,and the impact of financial derivatives on bank risk and performance.The research results show that:Firstly,the scale of derivatives transactions of commercial banks in China is mainly affected by the scale of bank assets、operating income growth rate、risk exposure and external interest rates and exchange rate fluctuations.The larger the bank assets,the faster the revenue growth,the greater the risk exposurethe and fluctuation of exchange rate,the more banks tend to use Financial derivatives;secondly,the current use of derivatives by commercial banks in China has not yet achieved the risk-averse effect,but has increased the risk level of banks;thirdly,derivatives transactions have a negative impact on the return on bank assets.According to the empirical results,in order to promote the development of China’s derivatives market and give full play to the advantages of financial derivatives,this paper puts forward the following three suggestions for the development of derivatives business in China’s commercial banks.Firstly,for commercial banks,it’s necessary to develop a suitable derivative development strategy.;and secondly,commercial banks need to enhance innovation and proficiency in the derivatives trading business,and enrich the types of derivatives transactions;and last,commercial banks need to completely the data disclosure of derivatives transactions,at the same time strengthen risk early warning measures to raise awareness of internal risk management.