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Risk Management in Financial Institutions

Publication ,  Journal Article
Rampini, AA; Viswanathan, S; Vuillemey, G
Published in: Journal of Finance
April 1, 2020

We study risk management in financial institutions using data on hedging of interest rate and foreign exchange risk. We find strong evidence that institutions with higher net worth hedge more, controlling for risk exposures, across institutions and within institutions over time. For identification, we exploit net worth shocks resulting from loan losses due to declines in house prices. Institutions that sustain such shocks reduce hedging significantly relative to otherwise-similar institutions. The reduction in hedging is differentially larger among institutions with high real estate exposure. The evidence is consistent with the theory that financial constraints impede both financing and hedging.

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Published In

Journal of Finance

DOI

EISSN

1540-6261

ISSN

0022-1082

Publication Date

April 1, 2020

Volume

75

Issue

2

Start / End Page

591 / 637

Related Subject Headings

  • Finance
  • 3801 Applied economics
  • 3502 Banking, finance and investment
  • 1502 Banking, Finance and Investment
 

Citation

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Rampini, A. A., Viswanathan, S., & Vuillemey, G. (2020). Risk Management in Financial Institutions. Journal of Finance, 75(2), 591–637. https://doi.org/10.1111/jofi.12868
Rampini, A. A., S. Viswanathan, and G. Vuillemey. “Risk Management in Financial Institutions.” Journal of Finance 75, no. 2 (April 1, 2020): 591–637. https://doi.org/10.1111/jofi.12868.
Rampini AA, Viswanathan S, Vuillemey G. Risk Management in Financial Institutions. Journal of Finance. 2020 Apr 1;75(2):591–637.
Rampini, A. A., et al. “Risk Management in Financial Institutions.” Journal of Finance, vol. 75, no. 2, Apr. 2020, pp. 591–637. Scopus, doi:10.1111/jofi.12868.
Rampini AA, Viswanathan S, Vuillemey G. Risk Management in Financial Institutions. Journal of Finance. 2020 Apr 1;75(2):591–637.
Journal cover image

Published In

Journal of Finance

DOI

EISSN

1540-6261

ISSN

0022-1082

Publication Date

April 1, 2020

Volume

75

Issue

2

Start / End Page

591 / 637

Related Subject Headings

  • Finance
  • 3801 Applied economics
  • 3502 Banking, finance and investment
  • 1502 Banking, Finance and Investment