Risk effect of derivative financial instruments on Turkish banking sector

The finance world has globalised day by day with the results of the improving technology and finance thus in the globalising world the importance of risk has become even more than before for the investors and the banks. Especially with the purpose of being able to control exchange rate and interest risk, the result of globalisation, financial enstruments have become a part of our lives and use of them became widespread. The derivatives such as forward, future, opsion, swap and the other derivatives have been used for speculation and to be protected from the risk, and underdeveloped market used them from time to time with the purpose of arbitrage. With the use of derivatives by the institutions and the investors, the uncertainty towards future has been minimised, therefore, the interest, both in the World and in our country for derivatives has extended. The purpose of this study; is to analysed the use of derivatives increasing day by day in the banks, seen as the biggest finance sector in out country between the years of 2007-2015, and to see effects to risk in the bank sector. The first chapter is the history of derivatives and the second chapter is the description and the purpose of using derivatives. The description and the types of risk are in the third chapter of the study, forth chapter is about the methods to use and the data, diagrams and the analysis of panel regression. And the last chapter is the fifth chapter, includes the result of the research. Obtained analyses results show that because of the consists unit root, un-stationarity and not giving cointegration results, credit risk, market risk and capital adequacy ratio does not have enough relation between deriatives. Key Words: Derivatives, Banking Risk, Unit Root, Cointegration, Panel Regression Analysis