Research Conversation with Finance PhD Candidate Congyu Liu

Congyu Liu

Enter the Research Conversation with Congyu Liu

Is there cross-hedging among subsidiaries under same parent bank holding companies? If so, how is it done and what are the costs and benefits?

My research shows that large subsidiaries are likely to hedge interest rate risk with derivatives for the smaller subsidiaries in the same group. Bank holding companies (BHCs) with better access to external capital markets, such as the equity, bond, and commercial paper markets, are more likely to have cross hedging among subsidiaries. Furthermore, in my on going research, I expect BHCs with cross hedging will experience lower interest income volatility and be less affected by monetary policy.

My research provides yet one more reason why we should not divide large bank holding companies into many small banks. In addition, my findings provide guidance on how to efficiently manage the interest rate risk of subsidiaries as a whole and coordinate risk management teams among subsidiaries to hedge interest rate risk with derivatives.

Status

PhD Candidate

Specialization

Finance

Area of Research

Financial intermediation, banking and risk management

Hometown

China

Fast Fact

I love traveling and classical music.

PhD Open House Part 1: PhD Overview

PhD Open House Part 2: Q&A Session