Research On Commercail Bank Foreign Exchange Risk Management Under The Perspective Of Risk Management Processes

With the continuing boost of the deepening reform of financial system and the marketization of RMB exchange rate, Chinese financial and economical degree of external development has made a further improvement and China is gradually integrating into the world economy system as a whole being. Then Chinese commercial banks’foreign exchange business is becoming richer along with the change of economic environment. And the diversity of the foreign exchange business and the strengthening of every market’s linkage increase the foreign exchange risk of commercial banks. Therefore, foreign exchange risk management has become increasingly important of Chinese commercial banks for seeking stable development in the future.Currently, Chinese foreign exchange risk management has also made some progress due to the perfection of management mechanism and the strengthening of supervision, but there are still many problems, such as weak awareness of foreign exchange risk, incomprehensive understanding, the backward of risk measurement and risk avoiding method. Those problems are seriously restricting the level of foreign exchange risk management of commercial banks. This paper will make a gradually progressive research on commercial banks foreign exchange risk from the point of the risk management process.In part of related mechanism of commercial banks’foreign exchange risk, it mainly starts from the points of foreign exchange risk identification, measurement and aversion perspective to define its theoretical concepts and methods. First, this part analyzes the formatting reasons of commercial bank’ foreign exchange risk and its category. Then, it defines and classifies the foreign exchange risk exposure of commercial banks, and exploreds its foreign exchange risk exposure methods. At last, it made a comparative analysis of commercial banks’foreign exchange risk measurement methods and management tools.For the part of empirical study on commercial bank risk management, the article is based on the main line of foreign exchange risk influential factors, risk identification, risk measurement and risk aversion. Firstly, it constructs a model of commercial bank’s foreign exchange risk influential factors. Then, it investigates the common influential factors of commercial banks’foreign exchange risk and the difference between different commercial banks with different nature. Empirical results show that for the five state-owned commercial banks, bank size, capital structure and liquidity ratio are the key factors of its foreign exchange risk, but for other joint-stock banks, the decisive influencial factor is the size of the bank. Secondly, it investigates foreign exchange risk exposure conditions between individual listed commercial banks and the whole banking sector from the point of view of asymmetry. Empirical study finds that listed commercial banks and the banking sector’s exposure show more obviously after considering asymmetry and foreign exchange risk exposure are different under different exchange rate conditions, overall, considering the foreign exchange risk exposure of asymmetry can be true and accurate to measure the extent of its foreign exchange risk exposure. Thirdly commercial bank foreign exchange risk metrics is researched by constructing multivariate Copula model to measure exchange rate fluctuations’ time-varying characteristics and using the Monte Carlo simulation to measure risk of exchange rate combination. The results show that the correlation between the returns of exchange rate sequence is time-varying; the VaR estimated value which is based on time-varying multivariate Copula model can be the actual skill to measure commercial bank’s foreign exchange portfolio risk. Making contrast between varying multivariate Copula model and static multivariate Copula model shows that the effect of VaR estimated which considering time-varying Copula model between exchange rate combinations is better. Finally, for the empirical research of foreign exchange risk aversion, the minimum lower partial moment is used to be the risk measure index, and selects commonly used international currency futures contracts to investigate the effectiveness of commercial banks’foreign exchange hedging by making contrast between the time-varying Clayton Copula model and the actual distribution method. Results show that the correlation between the yield of spot and futures currency render a significant dynamic correlation characteristics; Using time-varying Clayton Copula parameter method can improve the traditional minimum lower partial moment hedge ratio estimates than using the actual distribution method, hence to be more effectively avoid foreign exchange risk faced by commercial banks.As applied research, this paper finally puts forward some countermeasures for commercial banks foreign exchange risk management from the following three aspects: the commercial bank foreign exchange risk management experience analysis and enlightenment, commercial bank foreign exchange risk management of financial environment construction and the tools and commercial bank foreign exchange risk management strategies innovation.