Credit Risk Management Using Financial Hedging Tools in the Bank Sector
DOI:
https://doi.org/10.47604/ijfa.3737Keywords:
Financial Hedging, Credit Risk Management, Banking SectorAbstract
Purpose: To understand the concept of financial hedging tools and credit risk management identify the relationship between hedging tools and credit risk in the banks studied, and measures the impact of using different hedging tools in reducing credit risk. This leads to a set of recommendations for the banks studied
Methodology: The research adopted descriptive-analytical approach, which is one of the most common scientific research methods due to its flexibility and comprehensiveness in presenting and analyzing indicators related to the research variables. In addition, it employed econometric analysis, descriptive statistics, and quantitative hypothesis testing, tailored to the nature of the data from the banks under study, and then drew conclusions to solve the research problem.
Finding: There is significant variation among the five banks in their hedging levels; however, the overall trend shows a clear inverse relationship between the two variables. Banks that achieved higher values on the hedging index recorded lower levels on the credit risk index. This variation reflects differences in internal strategies and the effectiveness of hedging tools in mitigating credit risk and promoting financial stability among the banks.
Unique Contribution to Theory, Practice and Policy: Enhancing awareness of the importance of financial hedging tools in risk management through the development of academic frameworks and the establishment of training programs in this field. This also includes developing theoretical models that explain how financial hedging tools work and their impact on reducing credit risk and achieving financial stability for banks.
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Copyright (c) 2026 Bahaa Saeed Ghafel, Prof. Dr. Khalid Sabah Ali
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