The Bond Investment Decision Mechanism And Analysis Model Of Small And Medium-sized Banks

At present the bond investment is one of the main businesses except deposits and loans which are the most ones in almost all banks in China. However, the bond investment in banks is not focused by the bank’s managers, and the management method is not only very easier but also be with more risks. With the development of the market-based interest rate reform in our country, the profit styles in banks of China need to be changed from the interest spread between deposit and loan in the conventional businesses to the developing bond investment which is one of the main choices. As the important part in the banks of China, there are many challenges and some things developed in the small and medium-sized banks. Therefore, it is a very significant problem for the small and medium-sized banks to improve their management level and to change the styles of their businesses by the way of the bond investment.In this dissertation, the bond investment problems in the small and medium banks are studied, especially its decision mechanism and analysis model are the most problems. There are five parts in this dissertation. Firstly, the background and significance and the literatures about the bond investment are introduced. Secondly, the based things of bond investment in the small and medium size banks are introduced, and analyzing its characteristic, functions, operations, problems and risk. Thirdly, from the practical point of view, the decision mechanisms of the bond investment in banks are studied, we devised the system of allocation of resources, the system of organization and the system of performance appraisal according to the characteristic of the management of the small and medium size bank. Fourthly, we studied the effect of the macroeconomic indicators on the return of the bond investment with both qualitative and quantitative methods. Based on the qualitative analysis, the econometrics model is made in order to research this effect by using the factor analysis and the principal component analysis method. In the fifth part, we studied the strategy of the bond investment of the small and medium size bank by an investment portfolio bond model based on the risk management of the small and medium size bank. By introduction of the duration constraint, using the Semi-variance as a risk measure, we set up a bond portfolio model suitable for the small and medium size bank’s risk management of interest rate and liquidity. We analyzed the existence of the optimal solution of the model, and proved that the solution is a global solution of the model. Moreover, a Monte Carlo penalty function algorithm was constructed to get the optimal portfolio policies via the random attribute of the model, and proved the convergence of the algorithm. The corresponding numerical example was given for illustrating the validity of the model. At last, we summarized the conclusion and the shortcomings of our study and further studies.The main contributions lie in three aspects:The first, we studied the decision mechanism of the bond investment in the small and medium-sized banks from a practical view, and in order to providing some regulatory running styles for this kind of banks.The second, we construct the analytical framework for the effect of the macroeconomic indicators on the bond investment in this banks by both qualitative and quantitative methods. By constructing a multivariate statistical regression model used to analyze this effect, the economic explanation of the bond investment is given, and as a theoretical basis on study of the bond investment in this type of banks.The third, we studied the strategy of the bond investment of the small and medium size bank by an investment portfolio bond model based on the risk management of the small and medium size bank, in order to provide some scientific methods and decision for the optimal bond investment in the small and medium-sized banks.