Bank Assets and Liabilities Portfolio Optimization Model Based on the Dual-Gap Immunity of the Directional Duration and Directional Convexity

Changes in market interest rates led to the changes of bank´s assets and liabilities values, which led to the change of the owner´s equity of the bank and bring in risk to the bank owners. As a result, interest rate risk management of commercial banks is extremely important. We built a portfolio optimal model for bank assets and liabilities management by controlling the interest risk, which controls directional duration and directional convexity at the same time.