The Empirical Measurement of Interest Rate Risk of China’s Commercial Banks in the Process of Interest Rate Liberalization

Abstract

With China’s financial system reform deepening, interest rate liberalization reform has sharply entered an accelerating course. This paper focuses on the interest rate risk of China’s commercial banks in the process of interest rate liberalization. Based on the literature review on interest rate risk management of commercial banks, this paper carries out an empirical analysis on four forms of interest rate risk under the certain background of China, repricing risk, basis risk, optional risk and yield curve risk. Based on the Interest Rate Sensitive Gap Approach and Duration Model, this paper carries out an empirical measurement of interest rate risk of China’s commercial banks in the process of interest rate liberalization. In the end, this paper proposes the countermeasures and suggestions for the interest rate risk management practice of China’s commercial banks.