Interest Rate Risk Management Of Commercial Bank In China And Financial Instruments Innovation

Under the inevitable trend in the China's liberalization reform of interest rates, the Interest Rate Risk (IRR) has gradually become one of the main risks confronted with the commercial banks. Therefore, Interest Rate Risk management and prevention will become the main content of bank risk management. However, in terms of IRR management techniques or IRR management system, the prevention and control capacity of IRR remains weak, and IRR management is still in a relatively passive status by the way of "block". To overcome such "passive" plight, The commercial banks should use the positive IRR control methods by the way of "leading", such as forward rate agreements, interest rate futures, options, swaps and other derivatives as one of the most important ways. Under such background, this thesis attempts to develop new ideas for IRR management of the commercial banks through the use of interest rate derivative products. Such new risk management tool can make "Initiative" approach towards IRR management.This thesis first discussed about the interest rate risk under the condition of China's liberalization reform and the present stage "passive" IRR management of the current situation and existing problems in contrast with the progress of the development of international IRR management. Next, proposed that the innovation of financial instruments for IRR management of commercial banks is an effective way to innovate. On this basis, further revealed the advantages of financial derivatives, and described the process of the forward rate agreements, interest rate swaps, interest rate futures and options on the specific interest rate risk management. Then discussed the feasibility of the application of Interest Rate Derivatives to the IRR management for commercial banks and took OTC interest rate derivatives for the current choices. Finally, the relevant policy recommended.