The Study, Based On Commercial Bank Interest Rate Risk Var Model

Along with the liberalization of interest rate of our country, the risk of interest rate becomes one of the major risks of financial market gradually. To deal with the negative effect that brings by the liberalization of interest rate, we must strengthen the management of the commercial bank with risk management theory.Nowadays, VAR (Value at risk) has become the most popular risk measurement tool in the world. Research on VAR in other counties has developed relatively maturely and VAR has being the standard measure that many kinds of banks and non-bank financial institutions use to quantify market risk.This paper introduces and compares the early theories about the management of interest rate risk. And then uses demonstration technique to study the interest risk of commercial banks' RMB practical operation with a group of state from 11 Oct., 2005 to 1 April, 2006. The research outcome shows that it is applicable to use the VAR computed by Monte Carle method to estimate the real interest risk of China inter-bank offered rate market. During the liberation of interest rate, the paper suggests that commercial banks should use the VAR method to deal with the management of interest rate risk, state the system of information and foster more and more people with ability.