Research On Interest Rate Risk Management Of Commercial Bank In China Based On Financial Innovation

Interest rate risk management is always the core of commercial risk management, which hasn't been attached much importance to. Because of the defects that exist in Chinese financial market, the interest rate risk management is baffled in being flexible and realizable. The present article tries to offer theoretical use for reference and widen the instrumental area for the interest rate risk management for commercial bank of our country.This article is composed of five chapters. The preface illustrates the necessity and possibility for the commercial banks to manage their interest rate risk with the tool of financial innovation. Chapter Two does some theoretical analysis in interest rate risk management and financial innovation, and then introduce the cause of formation, classification, measurement and management method of interest rate risk, after which the relationship of financial innovation and financial risk are also included, on which can the latter analysis bases. The third chapter is decomposed in three sections. The first section makes institutional economics research in financial innovation, in which way can it build the framework according the institutional economics. Section Two analyzes the driving force and innovation path under the theoretical framework done in the first section. Meanwhile displays the financial innovation instruments that will be discussed next. The third section illustrates the interest rate actuality and the cause of formation, which can be controlled by the instruments discussed in the former section. Section Four and Five are the principal part of this paper, they separately does research in the role that the instruments play and the changes in the level of the interest rate brought by these instruments. Securitization, fixed rate mortgage loan, short-term bonds and common financial bonds are under the in-sheet management bound while RMB interest swap and bond forward are included in the out-sheet management methods. Conclusion is got in Chapter Six. It illustrates the role that the innovation instruments play in interest rate risk management. The financial innovation should be the breakthrough and effective means in solving some important issue and should be integrated in the exercise. We should pay much attention in the commit interest rate risk management concomitance risk after interest rate risk management. Reform should take place in both the software and hardware of the financial market.The innovation of this article firstly lays on the fully new prospect in discussing the interest rate risk management, without limiting on the initial theory. Secondly, this article sets out from the micro body and studies the usage of different financial innovation instruments in details and practice, filling up the blank of the present research which stays in theoretical side without manipulation. Another discovery is the radiation of risk management which means another type of risk may be induced in the process of interest rate risk management...