Management Of Interest Rate Risk In The Process Of Interest Rate Market

The theoretical basis of the interest rate market is McKinnon and Shaw’s theory of financial repression and financial deepening, financial deepening theory behind the developing countries is due to the interest rate is government regulation, distorts normal market demand, lack of efficient allocation of resources. If you want to develop the economy of developing countries must open government controls on interest rates, interest rates reflect market supply and demand. In the interest rate market conditions, the actual interest rate is higher than the level of interest rates under control, resources can flow to a reasonable place. McKinnon and Shaw’s theory has inspired many developing countries, the interest rate market-oriented reforms. But from the experience of foreign interest rate market-oriented reforms, the majority of countries have failed because of the interest rate market-oriented reforms will bring commercial banks interest rate risk, if the reform is too hasty banks have been closed down. Therefore, China has taken gradual steps in the interest rate market-oriented reforms, the rational and orderly manner the interest rate reform.In the process of marketization of interest rates, interest rate risk has become one of the major risks faced by commercial banks, repricing risk, basis risk, yield curve risk and embedded option risk is four sources of interest rate risk. For commercial banks face a variety of interest rate risk, what kind of measure is very important. First, to accurately measure the interest rate risk, and then to be able to manage interest rate risk.The current interest rate risk measurement methods there are three, namely, interest rate sensitivity gap method, method of duration and VaR method. In this paper, the three methods are compared with each other in the current status of China, then choose interest rate sensitivity gap method and Va R method to measure the interest rate risk. First use the GARCH-GED model and TGATCH-GED model to mesure the overall interest rate risk of commercial bank, concluded that fluctuations in interest rates has long-term memories and are leverage, the greater the negative impact of external shocks to interest rate fluctuations. In the second section use the interest rate sensitivity gap to mesure state-owned banks, national joint-stock commercial banks and city commercial banks’ interest rate risk, results are state-owned banks on interest rate risk management is more passive, interest rate management strategy adopted by the joint-stock commercial banks is more accurate, so less interest rate risk faced by them, although the city has also taken measures, but not enough to measure the effectiveness and timeliness of. Finally, prevention measures and suggestions of the external environment and the internal mechanism of commercial bank are put forward based on the results of empirical analysis.