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A NOTE ON INTEREST RATES AND THE RISK OF BANK AND SAVINGS AND LOAN STOCK
Author(s) -
French Dan W.,
Fraser Donald R.
Publication year - 1986
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1986.tb01143.x
Subject(s) - loan , interest rate , stock (firearms) , financial institution , financial system , debt , interest rate risk , business , economics , monetary economics , finance , geography , archaeology
This study examines the relationship between interest rates and the risk of bank and savings and loan stocks. Implied standard deviations from call option prices are used as risk estimates of the financial institutions’ stocks. Results indicate that there is a positive relationship between the risk of depository institution equities and the general level of interest rates. In addition, an upward shift in their risk occurred in late 1982, coinciding with several events that were important to the financial industry (the Penn‐Square Bank failure, the Mexican debt crisis, and the passage of the Garn‐St. Germain Depository Institutions Act).