Asset And Liability Management Model Of Commercial Bank For Interest Risk Immunization Based On 3-factors CIR Model

Due to the fact that China's financing system is predominant by indirect finance leading mainly by banks,banks have played a critical roles in our country's economy.According to the annual report of 2016 by China Banking Regulatory Commission(CBRC),the total assets owned by institutions of banking industry are about 232.3 trillions up to the end of the year,and have growed at an annual rate of 15.8 percents,the total liabilities owned by them are estimated to be 214.8 trillions,and growing at a rate of 16.0 percent.It is well known that banking is an industry operating with risks,and among the risks facing banks,interest risk is a leading risk that banks have to deal with.The study of interest risk immunization for banks has significant meaning,firstly it will improve the robust operation and development of banks under the increasingly fluctuated era.Secondly,it will decrease the risks of our country's banking,and therefor securing the stability of our country's macroeconomy.The main work of this thesis:(1)This thesis estimated the parameters of the CIR model using the quasi maximum likelihood estimation method based on Kalman filter with spot rate data of China national bonds,to insure the accuration the estimation of the parameters.(2)This thesis derived the stochastic duration vectors under CIR model,and the stochastic duration vectors of commercial bank's assets and liabilities are computed.(3)This thesis build an optimal asset allocation model for commercial banks,the objective is the maximation of the interest income,and the subjection are commercial bank's CIR stochastic duration gap are equal to zero.The main innovations and features of this thesis:(1)The value of bank's asset or liability is the present value of its future cash flows,and the equity value is equal to asset value minus liability value.So the fluctuation of interest rate will have a direct influence on bank's equity value.In this thesis,an optimal asset allocation model have been built to ensure the immunization of its equity value,with the objective of the maximation of the interest income.(2)This thesis estimated the parameters of the CIR model using the quasi maximum likelihood estimation method based on Kalman filter with spot rate data of China national bonds,to insure the accuration the estimation of the parameters and therefor to make sure that the immunization effect of the asset allocation model.(3)The immunization effect of stochastic duration under CIR model and duration under the Macaulay model are compared by using an interest rate volatility scenario method.And the comparion result showed that the immunization effect of stochastic duration under CIR model is better.