Forwards and swaps: A study of risk management in the Philippines

• Main Authors: Agcaoili, Dexter M., Ang, Clifford S.
• Format: text
• Published: Animo Repository 2003
• Subjects: Risk management—Philippines; Derivative securities—Philippines; Accounting
• Online Access: https://animorepository.dlsu.edu.ph/faculty_research/5518
• Institution: De La Salle University

The Asian Financial Crisis has highlighted the importance of Corporate Risk Management in addressing the risks that foreign exchange and interest rate exposures bring. We study 30 of the largest firms in the Philippines and find that 50% of the sampled firms use derivative products for risk management. The major types of derivatives that are used are forward contracts, interest rate swaps, and currency swaps. The derivative market is over-the-counter by nature, which is the primary reason for their high transactions costs. This market is dominated by foreign banks and is heavily regulated by the BSP. Given that no previous studies were made on the risk management practices of Philippine firms and derivatives operations of banks, this paper aims to create a starting point for future benchmarking and evaluation.