The Alm Optimization Model Based On Term Rate Duration

The key point of ALM is to balance risk and return of asset and liability.We can alter asset allocation in order to reduce the influence of market interest rate variation on EVE as much as possible under the some financial and non-financial constraint.Compared with portfolio optimization,ALM combines asset management with liability rather than considering risk and return of asset solely.With the development of Chinese interest rate marketization,bank faces with more and more severe interest rate risk.The form of market interest rate term structure variation is more and more complex.There is a big difference between various term market interest rate variations.The form of variation is not parallel shift under the hypothesis of traditional duration and is not level,slope and curvature shift.It is pressing to build a new duration model to deal with complex term structure variation.This paper selects key rates through clustering-regression method.ALM optimization model consist of objective function which maximize bank monthly interest income and constraints which make asset liability portfolio’s term rate duration gap equal zero.This model can manage the complex interest risk mentioned above.This dissertation consists of four chapters:(1)In this paper,the first chapter is "introduction".This chapter mainly discusses significance of the study and research background of ALM optimization model based on term rate duration.Then this chapter gives detailed analysis and discussion of bank ALM and key rate duration’s research status.Finally,this chapter point out content and framework of this paper and summarize main innovation and feature.(2)Second chapter is about ALM optimization model’s theory based on term rate duration.This research’s usage of key rate duration is different from traditional usage of key rate duration.This chapter explains the difference through the selection of key rate and immune principle.(3)In the third chapter,we build the ALM optimization model based on term rate duration.ALM optimization model consist of objective function which maximize bank month interest income and constraints which make asset liability portfolio’s term rate duration gap equal zero.There are some other laws and regulations constraints in this model.(4)Application example is in the fourth chapter.In this chapter,we collect basic asset and liability data of a bank and compute three term rate duration of bank portfolio.Then we builds optimization model and obtain best asset allocation.We confirm the model’s effectiveness through comparing with two other ALM optimization model.Main innovation and characteristics:Firstly,we build short term rate duration,middle term rate duration and long term rate duration,which can reflect different term market rate’s influence on asset and liability market value.In the reality,the pattern of different term market rate variation is quite different.Secondly,we divide the interest rates’ volatility of different maturities into three categories through the clustering and select a key point in each category to build a set of key points to represent the entire market interest rates’ fluctuations.This approach can make up for the key points’ unrepresentative by random selection in traditional key rate duration’s model.Finally,the optimization model based on term rate duration building in this paper breaks the limitation of NS duration’s model,which can only immunize the three standard forms of interest rate’s change,and put forward more realistic and intuitive immune model to manage short-term,medium-term and long-term interest rate changes.