Duration Model Analysis And Its Application

China adopts the progressive interest rate marketization reform, which is fundamentally keeping pace with the economic system reform. By now the near-medium-term target of interest rate marketization has been achieved. Complete fulfillment of interest rate marketization is deemed to happen in the near future. Under the condition of interest rate marketization, China's commercial banks will face with a kind of major market risks - interest rate risk. Hence, to strengthen interest rate risk management is one of the urgent tasks they shall undertake.Methodologies of interest rate risk measurement and their accuracy is one of the topics of greatest significance in commercial banks interest rate risk management. The speedup of China's interest rate marketization reform calls for introducing and developing practical new-type tools of interest rate risk quantitative analysis. This is the demand of the development of interest rate risk management theory and practice at home as well as of the commercial banks competing with foreign banks and promoting their comprehensive strength after China's entry of WTO.The duration models and duration gap technology are considered as one of the most reliable standards in international banking interest rate risk management and measurement. In the West, their application in the financial markets has attained a rather high level. This thesis depicts in brief the traditional Macaulay Duration Model, the Convexity Theory, the Fisher-Will Duration Model, the Effective Duration Model, the Random Duration Model and the Vector Duration Model. It implements study, comparison of and comments on all these models and theories concerning their advantages and disadvantages as well as the application scope of each. It implements comparison of The traditional interest rate sensitivity gap technology and the duration gap technology. The two important assumptions of the duration gap model restrict its value of application. This thesis will loosen the two assumptions and for the first time proposes the new models of correction duration gap and correction convexity gap. In the end, it undertakes an empirical analysis on the basis of the new correction duration gap model and the facts of a commercial bank's Hunan provincial branch, and then puts up concerning countermeasuresand recommendations on the branch's interest rate risk.