Research On Interest Rate Risk Hedging Of Commercial Banks Based On Cash Flow

The interest rate risk of commercial banks mainly comes from the possibility that the uncertainty of market interest rate changes will cause losses to commercial banks.With the deepening of interest rate marketization reform in China,the relationship between interest rate risk borne by commercial banks and market interest rate will be closer.After the reform of interest rate marketization,the market interest rate is determined by the supply and demand relationship of the market,which means that the fluctuation of the market interest rate will be more drastic than before the reform and affect the healthy operation of commercial banks,causing losses to depositors and endangering the high-quality operation of the overall economy.In this context,this paper focuses on the interest rate risk of commercial banks,measures the level of interest rate risk from the perspective of cash flow of commercial banks,and discusses the behavior of commercial banks to hedge interest rate risk through asset liability management.This paper selects the quarterly financial data of 36 listed commercial banks in China from 2006 to March 2021 and the China interbank offered rate in the same period to estimate the maturity of assets and liabilities of commercial banks.Based on this,we estimate the interest rate risk of Chinese commercial banks.Through the comparison with the actual cash flow,this paper finds that the interest rate risk faced by commercial banks in China is less than that estimated by the model.Through the analysis of the theoretical model,this paper concludes that commercial banks can avoid interest rate risk by matching the sensitivity of assets and liabilities to short-term interest rates one by one.This paper proposes two basic assumptions based on the theoretical model,and uses the cash flow method to analyze the cash flow of commercial banks’ income and expenditure respectively,to verify whether the basic assumptions are tenable in the actual operation and management of Chinese commercial banks.The main conclusions of this paper are as follows: first,the maturity of assets and liabilities of commercial banks in China is inconsistent to a large extent,and theoretically speaking,they should bear a large interest rate risk.However,the actual interest rate risk borne by commercial banks is less than the degree of maturity mismatch.Second,through the analysis of the theoretical model,commercial banks can reduce interest rate risk by matching the interest rate sensitivity of assets and liabilities one by one.This paper draws a conclusion through empirical analysis that China’s commercial banks have matched interest rate sensitivity to a certain extent,but the degree of hedging is not complete.Third,the results of this paper show that there is no negative correlation between commercial banks’ market competitiveness and interest rate sensitivity,but there is a significant positive correlation,which indicates that commercial banks in China sacrifice their own security while improving their market competitiveness,resulting in incomplete risk offset.Based on the actual situation of our country,this paper deeply studies the interest rate risk of commercial banks and the mechanism of commercial banks hedging interest rate risk,and puts forward targeted countermeasures and suggestions from different angles according to the research conclusions.