Graduation Year


Date of Submission


Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts



Reader 1

George Batta

Rights Information

© 2017 Chengwu Xuan


Using a sample of 1007 U.S. bank holding companies from 1995 to 2015, this study investigates whether the use of financial derivatives of U.S. bank holding companies affects distance-to-default, a measure of a bank’s chance of defaulting. My results show that total derivatives and total derivatives for trading purposes do not have any statistically significant impact on distance-to-default. There is, however, a statistically significant correlation between total derivatives for non-trading purposes and distance-to-default. More exposure to total non-trading derivatives decreases distance-to- default, thus making a bank holding company riskier. Further analysis of the results shows that, after the initiation of the Dodd-Frank Act, more exposure to credit derivatives will decrease distance-to-default, therefore increasing the riskiness of a bank holding company.

This thesis is restricted to the Claremont Colleges current faculty, students, and staff.