An Application Research Of VaR In Measuring The Interest Rate Risk Management Of China's Commercial Banks

With the continuous deepening of marketization reform of the interest rate, the interest rate risk faced by China's commercial banks is more and more highlighted, and the management technology to conquer the interest rate risk of our commercial banks needs to be improved urgently. In this paper, we will Set the Shanghai Interbank Offered Rate (SHIBOR) a total of 813 overnight lending rate data from October 8,2006 to December 31,2009 as samples, try to find out how to use the method of VaR(value at risk) to measure the interest rate risk of the commercial banks accurately. By comparing the parameter method based on GARCH model,the historical simulation method, the normal Montel Carlo simulation, and the Montel Carlo simulation based on the GARCH model, the research shows that the parameter method based on GARCH model and the Montel Carlo simulation based on the GARCH model are suit to measure the interest rate risk of Chinese commercial banks' positions on the Chinese Interbank market, while the other two methods are not apposite. Which VaR method the commercial banks should eventually choose will depend on the balance between the accuracy of estimation and the cost.The application of VaR method is of great significance to the improvement to the interest rate risk management system of Chinese commercial banks, also inevitable. However, for now, the Promotion of the VaR method in Chinese commercial banks are subject to several constraints, such as the imperfect database of the commercial banks, two-sides risk management, and the lack of relevant senior personnel.