Integration Risk. Liquidity Risk And Market Risk Measure

What the thesis studies is how to measure the liquidity risk and the market risk in the same flame,namely integrated risk measurement of incorporating liquidity risk and market risk.This article uses the copula function to construct the integrated risk measurement model,aiming at the following three problems:(1) How to measure individual asset's integrated risk driven by liquidity risk factor and market risk factor? (2) How to measure portfolio's integrated risk driven by many groups of liquidity risk factors and market risk factors?(3) How to extend the integrated risk measurement model in the dynamic frame on the basis of the above research.After constructing the integration risk measurement model,integrated risks of different size firms' stocks are calculated in empirical study on Chinese A-shares market.And the results calculated by our model are compared with those calculated by traditional models.This thesis consists of nine chapters:Chapter One is the introduction.It puts forward the question,then introduces this article's main innovation and difficulty,and carries on the overall plan for the research technique and frame.Chapter Two is literature review.First it analyzes the concept of integrated risk, and then reviews the existing research on liquidity risk measurement,market risk measurement,as well as their integrated measurement and summarizes the study on integrated risk measurement and its related financial studies based on copula function.Chapter Three introduces copula function to measure integrated risk of incorporating liquidity risk and market risk.How to choose optimal copula function is the key to applying copula function.Chapter Four is the analysis of stocks' integrated risk.It identifies liquidity risk and market risk as the main risks of China's A-shares,and adopts the semi-parametric method to construct the model for liquidity risk factor and market risk factor.After modeling,the dependence of liquidity risk factor and market risk factor of stock are studied from the theoretical and empirical aspects,so as to prepare for integrated risk measurement.Chapter Three and Chapter Four constitutes two footstones of integrated risk measurement.One is the method of integrated risk measuremen??timal copula function theory;the other is the motivity of integrated risk measurement,the market demand that is the current situation of risk factor of China's A-shares.Chapter Five to Chapter Seven is the hard core of this thesis which resolves the above three problems and carries on empirical test.Chapter Five studies the individual asset's integrated risk measurement of incorporating liquidity risk and market risk.Section 5.1 focuses on the model construction of integrated risk measurement.First of all,it constructs the integrated risk measurement model under one-time liquidation.Then,it discusses respectively the problem of integrated risk measurement on the premise of given liquidation strategy and the problem of integrated risk measurement on the premise of fixed expected liquidation.In section 5.2,in empirical study on Chinese A-share market, integrated risks of different size firms' stocks are calculated.Compared with the integrated risk measurement,risk measures are underestimated or overestimated by traditional VaR approaches.For individual share,optimum liquidation period or optimum liquidation strategies need to be determined in order to minimize their integrated risks.Chapter Six explores integrated risk measurement of portfolio.It extends the model of Chapter Five from individual asset to two-asset portfolio.In the portfolio level,integrated risk represents integrated risk driven by different market risk factors, and integrated risk jointly-driven by different liquidity risk and market risk factors as well.So after constructing the model of integrated risk measurement of portfolio in Section 6.1,Section 6.2 calculates portfolio integrated risk only in view of market risk. Section 6.3 calculates portfolio integrated risk in consideration of liquidity risk and market risk.Compared with the traditional method,it is empirically tested that the model of integrated risk measurement of portfolio can describe the heavy-tailed and skewed characteristic of various portfolio risk factors,and the dependence among the risk factors.Integrated risk will be underestimated if we do not consider liquidity risk and integrated risk will be overestimated by the way of adding liquidity risk to market risk directly.Chapter Seven is the dynamic analysis of integrated risk measurement.Chapter Five and Chapter Six measure integrated risk in the static frame,however,this chapter attempts to generalize the integrated risk measurement model into dynamic condition. Section 7.1 introduces the multivariate time series model based on copula function.In terms of the demand of integrated risk measurement in the thesis,Section 7.2 constructs the dynamic integrated risk measurement model on the basis of copula function,and does the empirical research.In comparison with the static frame, dynamic measurement model can reflects the change of liquidity risk factor and market risk factor of the recent situation more owing to considering the time variant.Chapter Eight gives a review and outlook of the thesis.At first,it reviews the main conclusions,making comparison between the model in the paper and the existing integrated measurement model from the theoretical and empirical aspects. Afterwards,it offers several proposals for financial risk management based on the article's study,and makes a summary of research insufficiency of the thesis.Finally,it expects the future of integrated risk measurement.