DU Jin-min, LIU Xiang-yun
Traditional duration model is only suitable for linear approximation assessment under the small change in interest rate and parallel shift of interest rate term structure, otherwise, it needs to be adjusted by employing convexity. This paper constructs a target mapping model based upon Markowitz' modern investment portfolios theory, which makes commercial banks at the end term of decision satisfy minimized interest rate risk and maximized yields when the convexity of bank asset/liability portfolio is non-negative, after reasonably determining the value of decision variables. Calculation case shows that in the given initial value and restraints, convexity gap model can lessen the exposure position of interest rate risk and increase yields. Meanwhile, when facing higher interest rate risk, convexity gap model can mitigate risk exposure than duration gap model, and then it is more robust.