Banks using derivatives face increased risks but can boost value.
The study looked at why Chinese banks use financial derivatives and how it affects their risks and value. They found that bigger banks with more capital are more likely to use derivatives. Using exchange rate derivatives lowers risks, but using interest rate derivatives increases risks. Larger banks using derivatives face more market and interest rate risks. Banks that manage risks well can reduce their risks and increase their value by using derivatives wisely. Foreign currency risks and bank value are connected.