Comparative Study On The Measurement Models Of Interest Rate Risk Of Insurer's Bond Investment

Along with the development of Chinese insurance industry, insurance investment becomes more and more important in insurance's operation. Insurance investment and insurance underwriting have been seen as two wheels in the insurance industry. Meanwhile with the acceleration of the process of market-oriented interest rate system, China has liberalized the control of various interest rates, the liberalization of interest rate has a very significant impact on the bond market, and the price of bonds will fluctuate with changes of the market interest rate. At present, bond investments research of Chinese insurance companies most concentrates on qualitative analysis .Quantitative analysis is very little. On the analysis of the bond's interest rate risk, both in theory and in practice, is based on Macaulay duration. As Macaulay duration of the inherent mistakes, it's not a good measurement of interest rate risk in bond investment, and therefore could not properly immunize for bond's interest rate risk. So it can't manage interest rate risk effectively.Under this situation, this paper introduces foreign advanced stochastic duration model in order to measure interest rate risk better, and they can manage their bond investment better.This paper first analyze the status of bond investment. Then analyze the interest rate risks of bond investment, and introduces the measurement methods of interest rate risk. These methods contain VaR methods, duration and convexity.Then there is a detailed discussion on the current measurement of interest rate risk for the duration models, including the traditional duration models and the stochastic duration models. The traditional duration models contain Macaulay duration, Modified duration and Fisher-Weil duration. And the stochastic duration models contain two kinds of single-factor stochastic duration and a kind of two-factor stochastic duration.Finally in conjunction with government bonds market data to estimate the parameters of the stochastic duration model, and compare the immunization effect of the various duration models. This paper finds that two-factor Moreno duration model is the best measurement of interest rate risk. And in connection with the actual situation of Chinese insurance companies, this paper puts forward some suggestions.