Study On Interest Rate Risk Management Of Commercial Banks In China Based On Treasury Bond Futures

Treasury bond futures is a agreement traded through organized exchange for specific bonds in the future delivery of a specific time at a predetermined price,the contract is a derivative used to evade the risk of interest rate.Study on the use of interest rate derivatives to manage interest rate risk in foreign countries has been quite mature,but in China,the interest rate has been controlled for a long time,commercial banks are generally lack of awareness of risk management,in 1990 s,China has launched the treasury bond futures,but soon it was shut down,so that the research mainly focuses on the experience and lessons of the failure of treasury bond futures pilot,with the advance of interest rate market,the domestic research mainly focuses on the measurement of interest rate risk,but because China has not launched interest rate derivatives for a longtime after closing the treasury bond futures market,so there is little study on the use of derivative instruments to manage the interest rate risk,the launching of treasury bond futures again provides the effective interest rate risk management tool for China’s commercial banks,with China’s full liberalization of deposit and loan interest rates and the basic completion of the reform of the interest rate market,it is necessary to carry out the corresponding research of the use of treasury bonds futures to manage commercial bank interest rate risk,In this paper,the related research is carried out.The path of Study is from the research of literature,from the abroad literature,it could be seen,for the management of interest rate risk,scholars proposed the term structure of interest rates,duration gap,convexity,sensitivity gap theory and methods which are widely used.Most of the research on the foreign bond futures focused on the pricing of the treasury bond futures.For domestic literature,this paper hackles the three aspects:the interest rate risk management methods,the correlation of bond futures and spot as well as the use of treasury bond futures to manage the interest rate risk,which would pave the way for further theoretical analysis and empirical analysis.Based on the research literature at home and abroad,this paper makes an in-depth analysis on the term structure of interest rates,interest rate risk classification,interest rate risk management theory,which would lay the groundwork for the interest rate risk measurement,at the same time this paper analyzes the function of bond futures hedging and the cheapest deliverable bond theory,which would provide the theoretical basis for the following calculation of bond futures duration and point value,combined with the theory of interest rate risk management,In the practical level,the use of treasury bonds could make commercial banks to avoid the impact of interest rate risk.This paper mainly use the methods of qualitative and quantitative to research the use of treasury bonds futures to manage the interest rate risk.Firstly,the daily closing price of the main five year treasury bond futures are selected since the contract was listed for transactions and the corresponding cheapest to deliver bond closing price,through the use of the unit root test and cointegration analysis,this paper proves that the closed price of the China five year bond futures and the conversion closed price of the cheapest to deliver bond have a long-term equilibrium relationship,so the cheapest to deliver bond duration could be used to substitute the futures’ duration;after that,twenty-four bonds are selected which is relatively active in the inter-bank bond market,According to the closing price of these bonds in December 31,2015,The term structure of interest rate is obtained by using the spline function;finally,this paper selects the data of assets and liabilities among the the 2015 annual report of the Industrial & Commercial Bank of China,combined with the term structure of interest rate,the F-W duration of assets and liabilities could be calculated,thus the bank’s asset liability duration gap could be got,in order to more accurately measure the interest rate risk,the convexity gap should be calculated,then through the use of bond futures that the gap would be adjusted to zero,so banks will not be affected by interest rate risk.By combining with the actual analysis,this paper also puts forward some suggestions for China’s commercial banks to use treasury bonds futures to manage interest rate risk.