The Improvement Of The Interest Rate Risk Analysis Models

Risk management is one of the most popular words with theglobalization,internationalization of the world finance, the liberalization of China’sinterest rates.The process of China’s interest rates liberalization started from lastcentury and so far has achieved important initial results. The liberalization bring notonly profit but also risk to the bond market. The interest rate risk is one of the majorrisk in bond investment. Then, to manage this kind of risk plays a key role in bondinvestment.Studies on the interest rate risk of commercial banks at home and abroadmainly focused on the term structure of interest rates,duration and convexity gap,andthe interest rate risk with embedded options,most of which are theoretical studies ormode derivation.Few studies have touched upon both quantitative research on theinterest rate risk of commercial banks and empirical research on the measurement of asingle interest rate risk. In a word, the now models are not capable for themanagement of interest rate risk. In order to help investors to manage the risk, thepaper starts from inter-bank bond repo market, integrate the major3models and usesmixed-normal distribution, Monte Carlo simulation, makes empirical analysis of theRepo Rate and China’s interbank treasury bonds repurchasing market.