1, interest rate risk
(1) repricing risk
Re-pricing risk, also known as maturity mismatch risk, is the most important and common form of interest rate risk, which stems from the difference between bank assets, liabilities and off-balance-sheet business maturity (in terms of fixed interest rate) or re-pricing maturity (in terms of floating interest rate). This asymmetry of repricing makes the bank's income or internal economic value change with the change of interest rate.
(2) Risk of yield curve
The asymmetry of repricing will also change the slope and shape of the yield curve, that is, the non-parallel movement of the yield curve will adversely affect the bank's income or internal economic value, thus forming the yield curve risk, also known as the risk of interest rate term structure change.
(3) Benchmark risk
Benchmark risk, also known as the basic risk of interest rate pricing, is also an important interest rate risk. In the case of inconsistent changes in the benchmark interest rate on which interest income and interest expenses are based, although the repricing characteristics of assets, liabilities and off-balance-sheet businesses are similar, the difference between their cash flows and income will also adversely affect the income or internal economic value of banks.
(4) option risk
Option risk is an increasingly important interest rate risk, which comes from the hidden options in bank assets, liabilities and off-balance-sheet business.
2. Exchange rate risk
Exchange rate risk refers to the risk that the banking business will suffer losses due to unfavorable exchange rate changes. Generally speaking, exchange rate risk is caused by the following activities of banks: first, commercial banks provide foreign exchange trading services to customers or engage in self-operated foreign exchange trading activities (foreign exchange transactions include not only spot foreign exchange transactions, but also financial contracts such as foreign exchange forwards, futures, swaps and options); Foreign currency business activities in bank accounts (such as foreign currency deposits, loans, bond investments, cross-border investments, etc.). What commercial banks are engaged in.
(1) Foreign exchange transaction risk
The risk of foreign exchange trading of banks mainly comes from two aspects: one is the foreign exchange exposure position that cannot be hedged immediately when providing foreign exchange trading services to customers; The second is the foreign exchange exposure position held by banks in anticipation of foreign exchange trends.
(2) structural risks of foreign exchange
3. Stock price risk
Stock price risk refers to the risk of losses to commercial banks due to adverse changes in the stock prices held by commercial banks.
4. Commodity price risk
Commodity price risk refers to the risk that the prices of various commodities held by commercial banks will change adversely and bring losses to commercial banks. The commodities here include some physical products that can be traded in the secondary market, such as agricultural products, mineral products (including oil) and precious metals.
General methods of market risk management:
Once the companies have determined the main risks they face, and have a quantitative grasp of these risks through risk measurement methods, these companies can now use various means and tools to quantitatively manage the risk exposure they face.
First of all, it needs to be clear that there is no optimal risk management method applicable to all companies. Different companies, even the same company at different stages of development, face different types and scales of risks, and need to adopt different optimized risk management strategies according to specific conditions.
Generally speaking, when the company thinks that the risk exposure it faces exceeds the standard that the company can bear, it can take the following measures to carry out risk management, so that its risk exposure can return to below the tolerable level:
Risk avoidance. Risks and benefits always go hand in hand, and while gaining benefits, we should also bear corresponding risks. Trying to completely avoid the impact of a certain market risk means completely withdrawing from this market. Therefore, for the owners of the company, completely avoiding risks is usually not the best risk coping strategy.
Risk acceptance. Some companies will ignore some risks they face in their business activities and will not take any measures to manage certain types of risks. The study found that almost all Swiss companies don't care about the exchange rate risks they face.
The risk is spread out. Many large companies and institutions often use the method of "putting eggs in different baskets" to spread risks, that is, effectively reducing risks by holding a variety of assets with low correlation. The cost of this method is often relatively low.
However, for small companies or individuals, due to the lack of sufficient funds and research capabilities, it is often impossible to effectively spread risks; At the same time, the modern modern portfolio theory also proves that the risk diversification method can only reduce the non-system risk, but not the system risk.
Risk transfer. Market risk itself cannot be eliminated fundamentally, but it can be managed through various existing financial instruments. For example, enterprises can use the method of financial engineering to decompose the risks they face, so as to reserve some necessary risks for themselves, and then pass the remaining risks on to others through derivative products (such as swaps and forwards). ).
Or, through the form of "operational hedging", reduce the risk exposure below the tolerable level. For example, companies can achieve the above goals by adjusting the supply channels of raw materials, setting up factories directly at the place of sale or adjusting the inflow and outflow of foreign exchange.