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Interest Rate Market Interest Rate Risk Management Of Financial Institutions In The Study

Posted on:2006-09-14Degree:DoctorType:Dissertation
Country:ChinaCandidate:M S XuFull Text:PDF
GTID:1116360152488291Subject:Finance
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China established the inter-bank market in January 1998 and in May 1998 liberalized the inter-bank interest rate and thus realized interest liberalization in the inter-bank market. Afterwards various kinds of interest rates were also liberalized: short-term security market, discount market have both been developing rapidly in recent years, and the interest rate of the government bonds is also determined basically by the market. Meantime, the interest rates of loans are in the direction of liberalization through the practice of floating rate and the gradual increase of fluctuation range. In September 2000, the loan interest rate of foreign currencies and the CDs of foreign currencies were also liberalized. According to the arrangement of the Central Bank of China., in May, 2002 8 rural credit facilities started the experimentation with larger range of interest fluctuation and the largest range for deposit interest rate is 30% and for loan it is 100%. Until then, China moved an important step towards interest rate liberalization. It can be foreseen in the near future China will have complete interest rate liberalization.Interest rate liberalization is an important link of financial reform in China. With the constant development of interest rate liberalization, China's financial sector is faced with a profound revolution of its external environment and internal structure. Aside from contributing to the optimization of funds and the independence of operation of financial organizations, more importantly, the operation risk that financial organization faces will increase. After interest rate liberalization, the mismatch between assets and debts will lead to the risk of interest rate gap. Meanwhile, most financial facilities hardly have any instrument to hedge interest rate risk, which will further increase the operation risk of financial institutions.All financial institutions in China have been operating under interest rate control, so that it follows the stereotyped thinking about business operation.Therefore it is a focus to which financial institutions in China should pay their attention that how to adapt to the new situation of interest rate liberalization, change their business philosophy, borrow international experience, and strengthen the management of interest rate.Developed countries have mature patterns of interest rate risk management. Foreign financial institutions have developed many new types of instrument to hedge interest rate risk. However, China is in the preliminary stage of socialist market economy, thus we have not fully realized interest rate liberalization, and our financial market has been far from being mature, therefore many financial institutions are still using the traditional thinking and methods to solve the problems in the new situation. In this context, we can't copy foreign experience but develop the more appropriate solutions on the basis of foreign experience.On the basis of previous researches on relevant subjects, the thesis examines, reorganizes, and analyzes both domestic and foreign researches on interest rate risk management of financial institutions. Then, according to the requirements of the thesis, various fieldworks were also conducted in relative financial institutions and government agencies to have an understanding about the development of the financial sector and to collect useful data. In the end, after a detailed analysis of all data, the thesis "research on interest rate management of financial institutions in the process of liberalization" is developed, which consists of 7 parts:The first chapter is a preliminary introduction to the relevant fundamental theories, which lay a firm foundation for the following parts. Risk refers to the possibility of suffering from various kinds of losses. Interest rate risk means the possibility of investors suffering from losses due to the fluctuation of interest rate. When there is a gap between the period of assets and that of debts of financial institutions, there will be interest rate risk. In other words, interest rate risk means t...
Keywords/Search Tags:Interest Rate Liberalization, Financial Institution, Interest Rate Risk
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