The Impact of Interest Rate Marketization on the Interest Rate Risk of Commercial Banks

2019 ◽  
Author(s):  
Yue Yu ◽  
Liu Lan
Keyword(s):  
Interest Rate ◽  
Commercial Banks ◽  
Interest Rate Risk ◽  
Rate Risk ◽  
Interest Rate Marketization ◽  
The Interest Rate ◽  
The Impact

scholarly journals The Effect of Risks on Banking Safety: Applied Study on Jordanian Traditional Banks (2005-2016)

2017 ◽  
Vol 9 (9) ◽  
pp. 102
Author(s):  
Mohammad Abdel Mohsen Al-Afeef ◽  
Atallah Hassan Al-Ta'ani
Keyword(s):  
Interest Rate ◽  
Credit Risk ◽  
Commercial Banks ◽  
Banking Sector ◽  
Liquidity Risk ◽  
Interest Rate Risk ◽  
Bank Credit ◽  
Applied Study ◽  
Rate Risk ◽  
The Impact

Banking sector is one of the most important sectors that support the sustainable economic development in Jordan, therefore this study aimed to test the impact of risks; (Liquidity risk, bank credit risk and interest rate risk) on the safety in the banking sector in the Jordanian commercial banks during the period 2005-2016.The results of the study showed that there is a statistically significant impact for each of liquidity risk and interest rate risk on the safety in the banking sector, and there isn't statistically significant impact for credit risk on the safety in the banking sector during the period of this study, and also find that the explanatory of model was 60.5%, which means that 39.5% due to other factors.

scholarly journals The Impact of Interest Rate Marketization on Commercial Banks

2021 ◽  
Vol 9 (4) ◽  
pp. 176
Author(s):  
Yulin He
Keyword(s):  
Interest Rate ◽  
Financial Institutions ◽  
Commercial Banks ◽  
Supply And Demand ◽  
System Reform ◽  
Analysis Process ◽  
Interest Rate Marketization ◽  
Rate Transmission ◽  
The Interest Rate ◽  
The Impact

<p>Interest rate marketization means that the interest rate level of financial institutions operating and financing in the money market is determined by market supply and demand. It includes interest rate determination, interest rate transmission, interest rate structure and marketization of interest rate management. At present, there are still many deficiencies and defects in the traditional interest rate management system. The reform of interest rate marketization is the focus of China’s financial system reform. Therefore, we should not only be brave in innovation, but also carefully study and analyze. In the analysis process, this paper focuses on the impact of interest rate marketization on commercial banks, and puts forward some countermeasures.</p>

scholarly journals Research on Interest Rate Risk of Housing Mortgage Loan Based on Computer Simulation

2021 ◽  
Vol 2021 ◽  
pp. 1-6
Author(s):  
Enlin Tang
Keyword(s):  
Computer Simulation ◽  
Interest Rate ◽  
Commercial Banks ◽  
Simulation Method ◽  
Interest Rate Risk ◽  
Mortgage Loan ◽  
Mortgage Loans ◽  
Rate Risk ◽  
The Interest Rate ◽  
Housing Mortgage Loan

In recent years, with the rapid increase of the business volume of housing mortgage loans of commercial banks, the risk of prepayment is increasingly exposed. Prepayment will have a great impact on the duration and convexity of housing mortgage loans of commercial banks and then bring difficulties to the asset liability management of banks. Therefore, empirical research on the changes of duration and convexity of housing mortgage loans caused by prepayment when the market interest rate changes is of great significance for commercial banks to manage interest rate risk exposure. Based on the analysis of the option characteristics of prepayable housing mortgage loan, the CIR model with GARCH(1, 1) is selected to describe the interest rate change path, and the computer simulation method is used to calculate OAS and then calculate the effective duration and effective convexity of housing mortgage loan under different prepayment rates, so as to understand the interest rate risk of housing mortgage loan in the presence of embedded option.

scholarly journals Pricing of Embedded Options in Bank Deposits and Loans Based on Jump-Diffusion Interest Rate Model

Complexity ◽  
2021 ◽  
Vol 2021 ◽  
pp. 1-15
Author(s):  
Enlin Tang ◽  
Song Xu
Keyword(s):  
Interest Rate ◽  
Commercial Banks ◽  
Jump Diffusion ◽  
Interest Rate Risk ◽  
Rate Model ◽  
Interest Rate Marketization ◽  
Interest Rate Model ◽  
Embedded Options ◽  
The Interest Rate ◽  
Interest Margin

The marketization of interest rate is an inevitable requirement for China’s financial reform and joining the WTO to connect with the international financial market. It is also an important link to improve the marketization degree of China’s financial system. The marketization of interest rate in China is gradually advancing according to its preset mode. In the process of interest rate marketization, an unavoidable problem is that while the interest rate marketization gives the commercial banks the autonomy of capital pricing, the fluctuation of interest rate is more and more frequent. However, due to the fluctuation of interest rate, the loan as the main assets of commercial banks will be prepayed by borrowers, and the time deposit as the main liabilities of commercial banks will be withdrawn by depositors in advance; that is, embedded options are implied in asset liability items, which makes it difficult for commercial banks to accurately calculate the actual interest margin of deposits and loans and manage the interest rate risk. Therefore, it is of great significance to identify and price such embedded option value. On the basis of identifying and decomposing the embedded options in deposit and loan of commercial banks, according to the change characteristics of deposit and loan interest rate of Chinese commercial banks, this paper chooses jump-diffusion interest rate model to describe the change of benchmark interest rate of deposit and loan in China and demonstrates the advantages of this model compared with other models. Based on Monte Carlo simulation technology, the embedded options of five-year fixed deposit and ten-year prepayable loan in China are priced. On this basis, it points out that the real interest margin of commercial bank’s deposit and loan should be the nominal interest margin minus the value of deposit and loan’s embedded options. In the process of interest rate risk management, we should pay attention to the existence of embedded options and carry out effective management.

Research on the Interest Rate Risk Management of Commercial Bank Based on F-W Duration Convexity Model

2014 ◽  
Vol 644-650 ◽  
pp. 5825-5827
Author(s):  
Feng Liu ◽  
Ping Zou
Keyword(s):  
Risk Management ◽  
Interest Rate ◽  
Interest Rates ◽  
Commercial Banks ◽  
Interest Rate Risk ◽  
Rate Risk ◽  
Interest Rate Risk Management ◽  
The Interest Rate ◽  
Marketization Reform ◽  
Management Capabilities

With the pace of interest rate marketization reform accelerates, interest rate risk faced by commercial banks increasingly prominent, so a higher demand for its interest rate risk management capabilities is required. This article describes the type of interest rate risk, then use F-W Duration Convexity model to make an empirical analysis in five large commercial banks. The results show: the five large bank duration and convexity gap are all positive, when interest rates rise, the five bank NV will be reduced, interest rates decline, then increased. According to ΔNV/PA, ICBC CCB and ABC faced the biggest interest rate risk, BOC followed, BCM minimum.

scholarly journals Risk of Interest Rates at the Level of Commercial Banks in Romania

2017 ◽  
Vol 22 (4) ◽  
pp. 281-288
Author(s):  
Ioana Raluca Sbârcea
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Commercial Banks ◽  
Asset Price ◽  
Banking System ◽  
Interest Rate Risk ◽  
Point Of View ◽  
Risk Indicators ◽  
Rate Risk ◽  
The Interest Rate

Abstract The banking system in Romania is a banking system under development, subject to fluctuations that exist on the market more than on more developed banking systems, fluctuations that can generate losses for banks if they are not properly managed. The losses that may be generated by these fluctuations, known as market risk, refer to the significant fluctuations in three indicators, namely the interest rate, the exchange rate and the asset price. In this article, I will analyse the interest rate risk from a conceptual point of view and the indicators that mitigate this risk. The analysis also contains a study of this risk among commercial banks in the system to highlight the level of risk and possible effects of its manifestation. I calculated and analysed the interest rate risk indicators, individually for the first three banks in the system, but also to comparatively, in order to highlight the existing differences.

scholarly journals Interest Rate Sensitivity of Non-banking Financial Sector in India

2018 ◽  
Vol 43 (3) ◽  
pp. 152-170
Author(s):  
Renu Ghosh ◽  
K. Latha ◽  
Sunita Gupta
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Stock Returns ◽  
Financial Institutions ◽  
Rate Sensitivity ◽  
Interest Rate Risk ◽  
Cross Sectional ◽  
Rate Risk ◽  
The Interest Rate ◽  
The Impact

Executive Summary Before financial liberalization, interest rates were administered and exhibited near-zero volatility. The easing of financial repression in the 1990s generated experiences with interest rate volatility in India. Administrative restrictions on interest rates in India have been steadily eased since 1993. This has led to increased interest rate risk for financial firms. Most research studies have almost exclusively focused on the developed countries especially the banking sector of the United States. The present study attempts to examine the interest rate risk of non-banking financial institutions in India by using the methodology of panel regression and generalized autoregressive conditional heteroscedasticity (GARCH) (1, 1) model for the period from 1 April 1996 to 30 August 2014. The sample used in the study consists of all non-banking financial companies (NBFCs) listed in the S&P CNX 500 index which has continuous availability of share prices over the study period. The study also examines the impact of unanticipated changes in interest rate on stock returns of NBFCs. The Box–Jenkins methodology is applied to calculate unanticipated changes in interest rate variable, autoregressive integrated moving average (ARIMA) (24, 1, 0) model. The time series used in the present study is found to be stationary at the first logarithmic difference. Stock returns exhibit significant exposure with both market returns and interest rate changes. The interest rate sensitivity of large, medium, and small financial institutions is also found to be different. Estimation results for the variance equation in GARCH (1, 1) model suggest that the volatility for individual firm stock returns is time-variant. The ARCH and GARCH coefficients are found to be significant, providing evidence against using traditional model (ordinary least square (OLS)) that assumes time-invariant volatility. This implies that the market has a memory longer than one period and volatility is more sensitive to its own lagged values than it is to new surprises in the market. This study also investigates the possible determinants that account for cross-sectional variation in the interest rate sensitivity of NBFCs. It is found that the size of the firm is the preferred determinant that accounts for cross-sectional variation in the interest rate sensitivity of finance companies. When unanticipated changes in interest rate are used in lieu of actual interest rate changes, not much difference is observed in the significance coefficients. The only significant difference observed is in the magnitude. The impact of actual interest rate changes is more than the impact of unanticipated interest rate changes in absolute terms. This difference in the magnitude of impact arises because actual data incorporate movement in both anticipated and unanticipated components of interest rate. Hence, NBFCs managers and regulators should adopt policies and strategies to avoid the transmission of interest rate risk in their stock returns.

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