The Incremental Portfolio Decision-Making Model Based On The Interest Rate Risk Immune Of Total Assets And Liabilities

The fluctuation of interest rate has become one of the major causes of operating troubles in the international banking industry. The interest rate fluctuation causes the price of asset and liability to change at the same time, which is going to bring risk to the owners' equity and holder-wealthy of bank. Unexpected changes in interest rates would affect the profitability management and development of innovative capacity of commercial banks, Therefore, interest rate risk management has become the core of international financial institution operating.This paper includes five chapters. The first chapter is the thesis background,research content and research framework. The second chapter offers the immune conditions of the interest rate risk about all portfolios of assets and liabilities. The third chapter established the incremental portfolio decision-making model based on the interest rate risk immune optimizing of total assets and liabilities. The fourth chapter is the application and analysis of this model. The fifth chapter is the conclusion and expectation. The main outcomes of the thesis are as follows:First, offers the immune conditions of the interest rate risk about all portfolios of assets and liabilities. Establish the function about banks' Net worth and the duration of incremental and stock portfolio of assets and liabilities according to the relationship between the change of value and duration of the single asset or liability, and then search the condition so that the relationship remains unchanged whenever the interest rate changes, it is the immune conditions of the interest rate risk.Second, this paper establishes the incremental portfolio decision-making model based on the interest rate risk immune optimizing of total assets and liabilities, by using deviation of All portfolio of assets and liabilities' the duration gap and 0 minimum as the first objective function, using portfolio Earnings maximum of bank's assets as the second objective function, using the monitor the Administration's policies and regulations for the restrictive conditions.The contribution characteristics lie on three aspects:First, by offering the immune conditions of the interest rate risk, To resolve the problem of interest risk control of the total portfolio of assets and liabilities which include the incremental and the stock portfolios. It changes the existing research' partial risk control practices which only based on incremental assets and liabilities.Second, by using the stock of assets and liabilities' remaining time to take place the time in the duration of expression of existing research, given the common expressions of the duration which can reflect both the incremental and the stock assets and liabilities' duration. Solve the problem of the total assets and liabilities' total risk measurement.Third, establish the objective function by using immune conditions of of interest rate for interest rate risk immune. So that the bank can determine the duration gap, based on the risk level they can bear, it changes the one-sided view that the bank can take the zero interest rate risk, and should give up a reasonable risk of earnings in using zero duration gap as a constraint.