Business

Interest rate risk of Chinese commercial banks based on the GARCH-EVT model

X. Chen, Z. Shan, et al.

This paper dives into the significance of Value-at-Risk (VaR) for Shanghai banks' overnight offered rates post-interest rate marketization in China. The researchers employed a unique two-stage method combining GARCH models and extreme value theory, revealing that the EGARCH-GED model significantly enhances risk management strategies for commercial banks. The study, conducted by Xin Chen, Zhangming Shan, Decai Tang, Biao Zhou, and Valentina Boamah, offers essential insights and policy implications for better banking practices.

00:00

Playback language: English

Index

Abstract

This paper examines the Value-at-Risk (VaR) and statistical properties of the daily price return of Shanghai banks' overnight offered rate (SHIBOR) after China's interest rate marketization. A two-stage approach combining GARCH-type models with extreme value theory (EVT) is used. A Markov regime switching model analyzes regime states, and the performance of different VaR models is compared. Results show the extreme value approach provides better estimates at the 99% confidence level, with the EGARCH-GED model being the most suitable GARCH-type model. Back-testing supports the approach's appropriateness for improving daily risk management in commercial banks. Policy implications are discussed to guide commercial banks' activities.

Publisher

Humanities and Social Sciences Communications

Published On

Nov 14, 2023

Authors

Xin Chen, Zhangming Shan, Decai Tang, Biao Zhou, Valentina Boamah

Related Publications

Explore these studies to deepen your understanding of the subject.

Economics

Analysis of the agricultural economic value of a weather forecasting service based on a survey of peasant households in Chinese provinces

D. Shen, X. Zhao, et al.

Economics

Effect of agency costs on the optimal matching grant rate in a model of tax competition with benefit spillovers

T. Yang

Education

Has excess epidemic prevention changed Chinese students' willingness to study abroad: three rounds of the same volume survey based on the new "push-pull" theory

S. Lin and J. Liu

Economics

Economic effect of the golf simulation industry in Korea: an analysis based on the SVAR model

Y. Hao and M. Kong

Listen, Learn & Level Up

Over 10,000 hours of research content in 25+ fields, available in 12+ languages.

No more digging through PDFs, just hit play and absorb the world's latest research in your language, on your time.

listen to research audio papers with researchbunny