The Evaluation Of Demand Deposits Of Chinese Commercial Banks

At present, China's market-oriented interest rates reform has made substantial progress. Interbank loan interest rate, repurchase interest rates and release interest rate of government bonds were already market-oriented. The relationships between various interest rates have also become increasingly standardized, and an integrated interest rate system is coming into being. As the public offering of state-owned banks and the keen competition in financial industry all require commercial banks improve its capabilities of risk control and asset management. As one of the main source of funding, demand deposits are very important for commercial banks. Because demand deposits are insensitive to market and relatively stable, so they don't need attracted any attention. But because of its embedded option, when market rates become go against banks this embedded option risk will be highlighted. For commercial banks, the Investment yields of demand deposits higher than demand deposits rate and with no risk. When commercial banks invest demand deposits into risk-free government bonds, the gained risk-free arbitrage reflected demand deposits premium. For a long time, China's controls over interest rates lead commercial banks needn't concern interest rate risk, and the interest rate risk management of major commercial banks are still gap-management, and they pay little attention to embedded option risk. The evaluation research of demand deposits can provide some supplementary reference for concerned work, and can also help commercial banks to improve its interest rate risk management.The studies on the evaluation of demand deposits abroad are developed only in the past 10 years, and the domestic researches in this area are still placed in the start stage. There are only a small number of related studies and still lack of empirical research support. As China's market-oriented interest rate reform acceleration, all commercial banks need to strengthen the management of embedded option risk in demand deposits. Firstly, this paper analyzed the three stages of the development of demand deposit evaluation model, and then made a contrastive analysis of these models, and summarizes the general elements of a demand deposit evaluation model. Secondly, this paper analyzed those factors which influence Chinese commercial bank deposits, and mainly analyzed the difference between time deposits and demand deposits. Finally, we established a valuation model for China's commercial banks'demand deposits, and made empirical analysis.Through the study of existed valuation model of demand deposit abroad, we established a valuation model for China's commercial banks'demand deposits, and made empirical analysis. The empirical results show that China's commercial banks'demand deposit premium do exists, and maturity, decay rate, market rate have little influence to this premium. Compared with other studies, this conclusion of the empirical study reflects China's demand deposits'characteristics well. Thus, this valuation model has a certain set of theoretical and practical value, and can provide a reference for similar studies.