A Study On The Interest Rate Risk And Its Management Of Commercial Banks In China Based On Bond Futures

On October 24,2015,the People's Bank of China announced the abolition of the cap control on deposit interest rates of financial institutions,which means that the marketization of interest rates in China has basically been completed,and also indicates that the interest rate risk management of domestic financial institutions is becoming more and more urgent.The developed countries in western capital markets have been very mature in applying interest rate derivatives to manage interest rate risk,including interest rate futures,interest rate options,upper and lower limits of interest rates and double limits of interest rates.On the contrary,China has few derivatives to manage the overall interest rate risk of commercial banks,such as interest rate options and upper and lower limits of interest rates.In contrast,interest rate futures,i.e.treasury bond futures,can effectively manage the interest rate risk of commercial banks;with the restart of five-year Treasury bond futures contracts in 2013,and the introduction of 10-year and 2-year Treasury bond futures contracts in 2015 and 2018,the variety of Treasury bond futures is becoming more and more abundant.This paper uses F-W duration gap model,which is widely used in the duration gap model,and adds convexity measure to measure the duration and convexity of Industrial Bank Ltd.Because there is a long-term equilibrium relationship between the bond futures contract and the corresponding cheapest-to-deliver bond(CTD),the duration and convexity of CTD can be used to replace the duration and convexity of bond futures contract.Finally,the hedging formula of basis point value method is used to adjust the duration and convexity gap of commercial banks to zero,so that commercial banks will not be affected by interest rate risk.