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Managing Risk by Using Derivatives: The Case of Hong Kong Firms

Author

Listed:
  • Eden S. H. Yu
  • Ivan Chan Hung Chin
  • Henry Fu Yiu Hang
  • George Lo Chi Wai

Abstract

Hong Kong has been very active in developing new financial products. This paper examines how firms in Hong Kong have managed risks by using derivatives. We conducted a survey to find out what kind of and to what extent financial engineering tools are used. Our survey reveals that derivatives are widely used to reduce risks. Moreover, most companies take risk measurement prior to including derivatives in the portfolios. The value-at-risk model is the most widely used risk management technique, followed by scenario analysis. In addition, we compare these survey results with the recent results for firms in Shanghai.

Suggested Citation

  • Eden S. H. Yu & Ivan Chan Hung Chin & Henry Fu Yiu Hang & George Lo Chi Wai, 2001. "Managing Risk by Using Derivatives: The Case of Hong Kong Firms," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 4(04), pages 417-425.
    • Handle: RePEc:wsi:rpbfmp:v:04:y:2001:i:04:n:s0219091501000607
    DOI: 10.1142/S0219091501000607
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    More about this item

    Keywords

    Risk management; Risk management practices; Survey results of Hong Kong firms using derivatives;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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