Impact of Operational Risks and Hedging practices of Banks in India

DOI: 10.5176/2251-1997_AF16.76

Authors: Madhumathi R. and Ranganatham M

Abstract:

The paper suggests a risk adjusted return model for measuring the operational risk of banks. The market model measures two types of operational risk: business component of operational risk and residual measure of market risk. The empirical analysis validates the model for India. Further it is shown that hedging practices help banks to meet the return expectations of investors.

Keywords: operational risk, credit risk, market risk, hedge.