The Management Of Interest Rate Risk Of Commercial Banks

As interest rate fluctuates increasingly, interest rate risk has become one ofthe major risks of commercial banks. This paper intends to carry out overallstudying on interest rate risk of commercial banks and offer beneficial referencesfor managing interest rate risk of our country' commercial banks. According to thepresent situation and obtained accomplishments in the world and the actualdemand of our reform of interest rate liberalization, we discuss how to manageinterest rate risk of Chinese commercial banks. The trend of interest rate liberalization began from 1970s, and financialunification made factors affecting interest rate grow, so the risk in a country causedby fluctuation of interest rate can promptly affect financial stabilization of othercountries. Therefore, economists and financial organizations have paid more andmore attention to and made much studying on interest rate risk. As financialenvironment changing more and more complex, their studying is goingcontinuously deep. One of key points of managing interest rate risk is to forecast interest rateexactly. If interest rate does not change or very less, just like under controlled,interest rate risk will not exist. If changes of interest rate can be forecast accuratelyin advance, that will be very good news not only to managers of interest rate riskbut also to investors. Since interest rate takes a very important position in the entirenational economy, economists never stop studying it. From different aspects,theyfind and solve problems associated with interest rate, including origin anddefinition of interest rate as well as management of interest rate risk. The definitiontheories of interest rate, such as Theory of currency supply and demand, Theory ofloanable capital, Theory of human impatience, Theory of liquidity and Theory of 123吉林大学博士学位论文 商业银行利率风险管理研究general balance, explore reasonability of interest rate and find definitive factors ofinterest rate from different perspectives. Besides, theories of term structure ofinterest rate are on the relationship between yield and interest rate term, andexplain the correlation between interest rates and terms. Among the representativetheories are Expectations Hypothesis, Liquidity Premium and MarketSegmentation Argument. Expectation hypothesis has given out the relation amongthe long-term interest rate, the short-term interest rate and its expectations, whichoffers a simple method of forecasting interest rate for us, so this theory gets muchattention from economic scholars. Many empirical economists have tested validityof this hypothesis, but obtained disappointing results. However, economists havenot been kept from exploring it continuously. Many of them have tested thehypothesis again and again with data from different periods, different terms anddifferent countries and gotten some beneficial discoveries, for instance ProfessorFama of Chicago university and Professor Campbell of Harvard. Their studies hadnot completely refused expectations hypothesis and offered some support for thistheory. But at the same time, economists have showed the high auto-correlationbetween interest rates, which can sometimes even reach the state of " random walk", and this characteristics has put forward stern challenges to forecasting interestrate. For phenomena of deviation from expectations hypothesis that arises in actualdata, many economists attempted to give reasonable explanations. Majority ofthem consider too strict assumptions of this theory as the main cause of deviationin reality, for instance complete replacement of long-term financial products withthe short-term financial products. Such assumptions are nearly impossible to be setup in practice. Based on expectations hypothesis, this paper employed thetechnology of neural network in artificial intelligence to investigate interest rateforecasting and...