As risk-taking is an essential part of the banking industry, banks must practice efficient risk management to ensure survival in uncertain financial climates. Banking operations are specifically affected by fluctuations in interest rates which cause financial imbalance, thus banks are now required to put in place an effective management structure that incorporates risk management efficiency measures that help mitigate the wide range of risks they face.
In this book, the authors have developed a new modelling approach to determine banks’ financial risk management by offering detailed insights into the integrated approach of dollar-offset ratio and Data Envelopment Analysis, based on derivatives usage. It further analyses the efficiency measurement under stochastic DEA approaches, namely (i) Bootstrap DEA (BDEA), (ii) Sensitivity Analysis, and (iii) Chance-constrained DEA (CCDEA). As demonstrated in the modelling exercise, this integrated approach can be applied to other cases that require risk management efficiency measurement strategies.
Additionally, this is the first book to comprehensively review the derivative markets of both the developed and developing countries in the Asia-Pacific region, by examining the differences of risk management efficiency of the banking institutions in these countries.
Based on this measurement approach, strategies are provided for banks to improve their strategic risk management practices, as well as to reduce the impacts from external risks, such as changes in interest rates and exchange rates. Furthermore, this book will help banks to keep abreast of recent developments in the field of efficiency studies in management accounting, specifically in relation to hedge accounting, used by banks in the Asia-Pacific region.
Chapter 1. Introduction Chapter 2. literature review – relationship between derivatives and risk management and the concept of risk management efficiency and its measurement Chapter 3. risk management efficiency measurement and analysis – an alternative measure based on hedge accounting Chapter 4. an alternative methodology for risk management efficiency measurement and analysis using dea approach with ratio analysis based on hedge accounting Chapter 5. risk management efficiency measurement and analysis under uncertainty Chapter 6. research summary and conclusion