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.