The Interest Rate Market Conditions, Commercial Banks Interest Rate Risk Management

With the deepening of our economic system reform and financial system reform, interest-rate marketization has been pushed gradually. Thus, interest rate risk will become the major risk in commercial bank's operation. How to manage interest rate risk effectively will become a complicated problem for the management of commercial bank.The thesis, whose subject is to managing commercial bank's interest rate risk, first discusses the necessity & feasibility of interest rate marketization and its influence on commercial bank. Then it analyzes the causes & identification of commercial bank's interest rate risk in our country, as well as the two methods (interest sensitive gap & duration) to measure commercial bank's interest rate risk and their limitation in practice. After that, it expounds how to control commercial bank's interest rate risk. In this thesis, it discusses gap management method and the utilization of financial derivative instruments to avoid interest rate risk, especially the effect and operating tactics of interest rate swaps, interest rate futures and interest rate options. Finally, it introduces a successful case of managing interest rate risk to prove the effectiveness of using these derivative instruments.