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The Exchange Rate Exposure of Major Commercial Banks in South Africa

Author

Listed:
  • Walter A. de Wet
  • Tewodros G. Gebreselasie

    (University of Pretoria)

Abstract

This paper examines the exchange rate exposure of South Africa's major commercial banks with the help of an augmented market model. In contrast to the weak empirical evidence in prior studies done abroad, this study reveals that all the four major banks exhibit significant foreign exchange risk. Our findings indicate that the net foreign currency asset position is a weak predictor of foreign exchange risk. The study sheds light on the averaging and offsetting effect of measuring exposure over an extended period of time. The results offer more evidence about the prevalence of economies of scale in currency risk management.

Suggested Citation

  • Walter A. de Wet & Tewodros G. Gebreselasie, 2004. "The Exchange Rate Exposure of Major Commercial Banks in South Africa," The African Finance Journal, Africagrowth Institute, vol. 6(2), pages 21-35.
    • Handle: RePEc:afj:journl:v:6:y:2004:i:2:p:21-35
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    Citations

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    Cited by:

    1. Eric Wong & Jim Wong & Phyllis Leung, 2008. "The Foreign Exchange Exposure of Chinese Banks," Working Papers 0807, Hong Kong Monetary Authority.
    2. Wong, Tak-Chuen & Wong, Jim & Leung, Phyllis, 2009. "The foreign exchange exposure of Chinese banks," China Economic Review, Elsevier, vol. 20(2), pages 174-182, June.
    3. Ledenyov, Dimitri O. & Ledenyov, Viktor O., 2015. "Wave function method to forecast foreign currencies exchange rates at ultra high frequency electronic trading in foreign currencies exchange markets," MPRA Paper 67470, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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