Study On Interest Rate Risk Management In China's Commercial Bank

Chinese finance administration has been promoting marketing of interest rate; interest rate would undergo fluctuation in last few years and in the future. China commercial banks will face more and more interest rate risk gradually. Compared with liquid risk and credit risk, interest rate risk will lead all commercial bank risk. Therefore, analyzing and studying on interest rate risk is critical to the safety of commercial banks.Starting from recent years'adjustment of Chinese interest rate, the research analyzes much interest rate risk confronted to commercial banks faced with market-oriented interest rate. In the meaning time, the current management status of interest rate risk in China is discussed. Six models are discussed. They are sensitive gap model, duration gap model etc. Advantage and disadvantage of those models are compared. After that, the thesis explains all sorts of strategies which are used in risk management in banking area.By doing research this paper points out that the existing problem is that management administration in banking system manages interest rate risk passively. Then the paper suggested that banking management should consider financial innovation instruments control interest rate risk in China commercial banks. It is used by developed country and is an effective way in this area. Then the paper casts light on financial derivatives managing interest rate risk and analyzes operation mechanism of basic derivatives which are interest rate futures, interest rate swap, forward rate agreements, and interest rate options. Paper finalizes the feasibility of the application of interest rate derivatives for the interest rate risk management in China commercial banks and chooses OTC (over-the-cowter) under current circumstance. Finally, relevant policies were recommended.