Measurement Of Foreign Exchange Risk Exposure Of China's Banking Industry

Since the RMB exchange rate system reform in 2005,china has undergone several times reforms in the exchange rate system.Over the past ten years,the RMB marketization degree has been significantly raised.Particularly since the reorganization of the exchange rate reform in 2010,the volatility of the RMB has been significantly enhanced and the RMB has become increasingly volatile.Relevant theory has been proved that the fluctuation of exchange rate will affect the value of enterprises and its market performance.With the continuous development of China's commercial banks in the degree of internationalization,the exchange rate fluctuations will make commercial banks face greater exchange rate risk.Faced with the ever-changing and complex exchange rate changes environment brought by the reform of the RMB exchange rate system,how to respond to the increasing foreign exchange risk in China's banking industry is an important issue for the bank risk management.Therefore,under the macro-environment where the exchange rate is increasingly fluctuating,it is of practical significance to study the foreign exchange exposure of commercial banks in our country.This article uses the capital market method to makes empirical research on the foreign exchange exposure of 16 listed commercial banks in our country,select the data since the reorganization of exchange rate system reform in 2010.First,the author theoretically qualitatively introduces the definition of foreign exchange risk and foreign exchange exposure,and analyzes the influence mechanism of foreign exchange risk on commercial banks.Then,the paper summarizes the measurement methods of foreign exchange risk exposures and the related literatures at home and abroad,which lays the theoretical foundation for this article.Then,we introduce the model design and data selection of the article.In the last part of the empirical study,this paper firstly compares the Jorion model with the Fama-French three-factor model and selects the Jorion model as the basis for the follow-up study.Based on this,the paper combines the latest research results to consider the possibility of asymmetry,lag and other characteristics in the bank foreign exchange exposure,the paper use bilateral exchange rate and multilateral exchange rate to do empirical test.The main conclusions of this paper are as follows:1)China's commercial banks are generally exposed to foreign exchange exposure;2)there is a positive relationship between changes in the exchange rate of RMB and changes in the stock returns of the banks in the short run,and in the long run there is a negative relationship;3)foreign exchange exposure has the characteristics of lagged effect and asymmetry effect,and the lagged effect of the foreign exchange risk exposure weakened with the increase of the number of lags period;4)commercial banks also have some interest rate risk exposure,and the relationship between interest rate and the bank stock price is negative.