Analysis of the Impact of Interest Rate Derivatives on the Market Risk of Commercial Banks in China

Abstract

With the development of China's financial derivatives market, China needs to pay more attention to the management of interest rate risk, and commercial banks should avoid interest rate risk typically through the role of derivatives. China's financial markets have been opened up to the rest of the world, and many international factors are influencing the changes in our financial markets. This paper focuses on the function of interest rate derivatives and their impact on commercial banks in China. This is an important step for commercial banks in China to take in order to reform and improve themselves. Using interest rate derivatives to enable banks to reduce their operational risks and to ensure the safety of China's financial system is the goal of this paper. According to the findings of the research, the adoption of interest rate derivatives can help commercial banks decrease their exposure to market risk, credit risk, and liquidity risk.