The Application Of Duration Model In Interest Rate Risk Measurement Of Commercial Banks

Since the 1970s, the commercial bank is imperiled by interest rate risk with the development of financial market, especially with the advance rapidly of financial derivative instrument and the rapid process of financial liberalization. Therefore, the subject of strengthening the interest rate management is emergent to commercial bank.From the interest rate marketing reform in foreign and nation and under the situation of interest rate management in China, the paper emphasizes the interest rate management and especially the interest rate risk measurement, introduces three main interest rate risk measurement models including interest rate sensitivity gap model, duration model and VaR model, and compares the three models. The reason of selecting the duration model by commercial banks in China is analyzed by using the relevant theoretical methods and combining the situation of China. Using the empirical analysis, the paper illuminates the application of duration model on interest rate risk management of commercial banks in China in the case of the strategy of interest rate risk immunity based on duration gap. Finally, some suggestions are proposed to the constraint conditions faced by duration model.