Derivative products and Turkish banking sector applications

Globalization of international monetary movements and developments in financial technology have been both beneficial and challenging for banks. They have brought new problems and risks together. Derivative products have emerged as a result of banks' tendency to hedge themselves as well as their customers against possible risks.This study examines decision of Turkish banks, to use derivative products by looking at the volume of derivative transcactions conducted over the years in Turkey. For this purpose, annual derivative transaction volumes of the Turkish Banking Sector were taken between 2008 and 2016, and 8 independent variables are chosen from literature to analyze how these variables affected derivative transactions. No relationship was found between 4 of the selected independent variables (net profit / loss, capital adequacy ratio, return on assets and return on equity) and the use of derivative products, while only one of the 4 variables (equity size, liquidity adequacy ratio and net interest margin) had a direct positive relation and the remainder variables had a negative relation.