Statistical Studies On Foreign Exchange Risk Exposure Of Chinese Commercial Banks

This paper aims to study the foreign exchange risk faced by China's commercial banks during their running, which uses statistical methods to give the foreign exchange risk exposure of commercial banks a quantitative analysis. Considering the operational characteristics of commercial banks in China, the paper sets up a unilateral exchange rate model, a multilateral exchange rate model and a multilateral exchange rate lag model based on the capital market model which is improved by Jorion (1990). Fully making use of models mentioned above, we adopt progressive method to estimate the foreign exchange risk exposure of China's commercial banks.The empirical analysis results show that, most of China's commercial banks have significant foreign exchange risk exposure under the circumstance of the lagging effect and the level outweighs those of other countries'commercial banks. What's more, even for the smaller commercial bank, there is also existing significant foreign currency risk, which suggests that the question that China's commercial banks are influenced by indirect rate risk shouldn't be ignored. In addition, the exchange risk exposure directions are significantly different among various commercial banks, which show that effective enterprises'risk management is very important for evading foreign currency risk. Finally, different currency fluctuations have a different effect on the value of our country's commercial banks.Therefore, we suggest giving a high priority to the exchange rate risk faced by China's commercial banks during their running. Not only the direct risk caused by foreign exchange business during their running should be concerned but also the indirect risk caused by domestic business should be paid attention to as well. Besides, both the dollar exchange rate risk and others'foreign exchange rate risk should be considered. Finally, we need to emphasize and strengthen risk management within the enterprise, meanwhile, encourage and help enterprises using derivatives to conduct the risk management.