An Empirical Study Of Interest Rate Risk On Commercial Banks In China

Interest rate is the core of modern economy and finance. After the interest rate market-oriented reform, interest rate fluctuated frequently an interest rate risk faced by commercial banks increased suddenly. In the current context of globalization of the international financial market as well as China's gradual deepening of the interest rate market-oriented reform, China's commercial banks'interest rate risk have become the focus of attention by academics and practitioners.About 20% of the total assets in China's commercial banks are government bonds and policy financial bonds, and the issuance and trading of these bonds has been achieved in the market-oriented, so these bonds held by commercial banks face greater market risks. The object of study in this paper is the interest risk for government bonds held by commercial banks. In the VAR parameter analysis framework and by the AR (2)-GARCH (1,1) model's quantitative analysis, empirical results show that the method can measure interest rate risk of China's Commercial Banks. Finally, this paper gives some recommendations for China's commercial banks interest rate risk management status.This paper has five chapters. The first chapter is introductory remarks to the topics, background, purpose and meaning of this paper as well as domestic and foreign relevant literature for the interest rate risk management. Chapterâ…¡summarizes the theoretical part of the commercial bank interest rate risk management. The third chapter describes how to measure interest rate risk of commercial banks. Chapterâ…£is the empirical analysis part of interest rate risk for the government bonds. Chapterâ…¤gives some recommendations on China's commercial banks interest rate risk management.The innovation of this paper are the following:(1) comparing China's commercial banks and foreign commercial banks interest rate risk (2) combining VAR parameter analysis method and AR-GARCH model as well as considering the "fat tail "properties of financial data; (3) The empirical object of CITIC and Standard & Poor's debt index, the index is a fully representative of the entire bond market (exchange bond market, inter-bank bond market) which is a comprehensive authority of the Bond Index.