Study On Chinese Commercial Bank's Exchange Rate Risk Management

From July 21st,2005, The RMB exchange rate formation mechanism is reformed.China has moved into a new exchange rate system, which is managed floating exchange rate system on the basis of market supply and demand, according to a basket of currencies to adjust. RMB will no longer to be pegged to the USD. Exchange rate will change more flexible. Domestic commercial banks which were accustomed to a fixed exchange rate system have been exposed to foreign exchange risks from then on. At the same time, as china's financial sector is opened to foreign financial institutions, currency authorities of China have been accelerating the forming of an effective domestic foreign exchange rate market. Our commercial Banks, international business will also be more and more frequently and complex and more foreign exchange derivative products will be introduced internally. So to prevent exchange rate risk will become our commercial banks'important issues in the future. Commercial banks must enhance their capability no managing foreign exchange risks in order to maintain their steady and last developing.The thesis discusses the topic along with the track that is from theory to practice; from analyzing present realities to coming up with problems and solutions. It learns from international advanced experience e, also sticks to our country's realities. It has both qualitative analysis and quantitative analysis. This thesis is consisted of four chapters. Firstly, the preface introduces the thesis's research background and significance, and concluded the literature of the exchange rate risk management in foreign commercial banks. Secondly, it introduces the exchange rate risk management experience of advanced international commercial banks. Thirdly, it analyzes status of the exchange rate risk management of our commercial banks. Combined with the actual situation in China, it measures the exchange rate risk by internationally model such as the foreign exchange exposure model, VaR model. Lastly, it putforward the problems and suggestions to deal with RMB exchange rate risk for domestic commercial banks.According to the actual situation in China, the thesis divides the exchange rate risk into exchange rate risk of assets and liabilities; exchange rate risk of exchange capital and exchange rate risk of trading. Based on this, it measures the exchange rate risk of domestic commercial banks by internationally model. The thesis tries to have a comprehensive study of exchange rate risk, and sets up a comprehensive risk management system consist of risk identification, risk measurement and risk control.