Research On Volatility And Tail Risk Measurement Of China's Capital Market

The risk control and stable development of the capital market are important topics that Chinese financial management workers pay attention to.The volatility and extreme tail risks of the capital market have caused tremendous damages to the capital market and the real economy.Assessing the risks of the capital market is a key area of concern for managers,investors,and scholars.Especially in recent years,major risk events such as the rise of global trade protectionism and COVOD-19 have caused drastic fluctuations in the prices of various assets in the global capital market,and frequent tail risk events have brought huge impacts and loss to the global capital market and the real economy.In this context,an effective tail extremum risk measurement can not only reduce the risk of capital investment,but also improve the effectiveness of financial risk management,which will help regulators to monitor and prevent risk outbreaks more effectively,which is important for realizing the stability of the capital market and ensuring the stable development of the economy.This article focuses on the volatility and tail risk measurement based on Chinese capital market,starting from the volatility prediction model and tail risk model,constructing risk measurement based on the theoretical basis of risk measurement,and then studying the application of risk measurement in capital market volatility and tail risk.Nowadays,with the continuous improvement of the capital market and the information technology,the transmission speed of market information is extremely fast.Based on the volatility and tail extreme value risk theory and the market efficiency theory,the traditional use of historical low-frequency data to predict the future market volatility and tail risk ability declines,and the information value of non-high-frequency market historical data is limited.It is necessary to analyze risks from more ways,and even add some subjective judgments to control risks.This article considers that the option price in the option market not only contains historical data information,but also includes expectations for the future market,and that the option market is dominated by professional institutional investors,and the expectations for future risks in the market are relatively more accurate.Due to the late start of the option market in China,there are not many empirical studies on related issues.However,with the development of the option market in China in recent years,the types and historical data of the option market in China have accumulated enough.Starting from model-free implied volatility of the option market and adjusting the model combined with the characteristics of the Chinese market,a new volatility measure,adjusted generalized model-free implied volatility GVIX and a tail risk measure based on generalized model-free implied volatility and extreme value theory GVIX-EVT are constructed,which improves the prediction accuracy of related measures,and enriches the research methods in this field.Regarding the application of risk measurement,this paper analyzes the tail risk spillover and risk asset portfolio of the capital market to solve the practical problems in the risk management of the capital market.For the tail risk spillover analysis,this paper uses the multivariate multi-quantile regression model MVMQ-CAVia R,and based on the VIX risk measurement of the option market,analyzes the impact of trade friction on the tail risk spillover path of the Sino-US capital market.In the research on the portfolio allocation of risky assets,this article points out that in the construction of the original Black-Litterman model,the uncertainty of how to specifically quantify the investor's views is not given.In order to solve this problem,this paper introduces the model-free implied volatility VIX on the basis of the original model,and constructs the VIX-BL model.This model can not only solve the problem of the reliability of subjective judgments not described in the original model,but also can It improves the effectiveness and robustness of the model for risk portfolio allocation,reduces the volatility risk and retracement risk of the portfolio,and proves the effectiveness and feasibility of adding subjective judgments to risk control management from theory and practice.This paper is divided into seven chapters,and the content of each chapter includes:Chapter 1 is the introduction,which in turn summarizes the topic background,research significance,concept definition,research status,research framework,main innovation points,and the structure and content of the thesis.Chapter 2 mainly describes the theoretical basis of volatility and tail extreme value risk,different methods of volatility calculation and the method of tail risk calculation,discusses the relationship and difference between volatility indicators and tail risk measures,and focuses on tail market risk,introduces the test method for the tail risk measurement.Chapter 3 discusses the calculation method of model-free implied volatility by fitting an exponential function to the option price and the exercise price,which solves the problem of inaccurate calculation of implied volatility caused by the poor coverage of tradable option exercise price and insufficient coverage density in the option market,and apply it to China's option market to verify and compare the amount of information including realized volatility between this method and the original method.In addition,this article combines current market data affected by sudden financial risk events such as COVID-19,and analyzes the reliability of the realized volatility prediction methods in the Chinese capital market.In the empirical analysis of multi-variety option contracts,this chapter also found that there is a certain correlation between the implied volatility of different options in Chinese option market.For the same underlying option contract,due to different liquidity or different trading rules,some option contracts have prices premium,which lead to high volatility indicators.Chapter 4 focuses on the measurement of market tail risk.Extreme tail risk is a concern of financial risk managers.Especially in recent years,extreme risk events such as Sino-US trade friction and the COVID-19.An effective tail risk measurement is very important.Based on the extreme value theory,this chapter combines the model free implied volatility method derived from the variance swap theory with the generalized Pareto distribution,adjusts the GVIX calculation method according to the characteristics of China's option market,and constructs the GVIX-EVT tail extreme value risk measurement method,which enriches the academic research in this field.The tail risk measurement calculated by the GVIX-EVT model introduced in this chapter is relatively more effective in predicting the degree of tail loss of extreme risk events in Chinese stock market.This indicator helps risk managers respond to and prevent the impact of extreme risk events on the capital market.Chapter 5 focuses on the tail risk of the capital market.Based on the multivariate multiquantile regression model MVMQ-CAVia R,and the MVMQ-CAVia R model embedded with the VIX volatility index,it analyzes the risk spillover relationship between the Sino-US stock market and the bond market,and examines Sino-US Whether the trade friction has significantly changed the original risk spillover relationship between the Sino-US stock market and the bond market,and explains the reasons for the change of Risk Spillover structure in stock market and bond market from the theoretical mechanism of portfolio balance and behavioral economics,and puts forward some suggestions for preventing and resolving the systemic financial risk in China's capital market.Chapter 6 optimizes the risk allocation model based on the measurement of the riskfree implied volatility of the capital market.In this chapter,the VIX Index of model free implied volatility is added to the confidence matrix of investors' subjective judgment,As the uncertainty index of subjective judgment,combined with the original BL model,the vix-bl model is obtained,and the objective expression of the investor subjective judgment confidence matrix in the original BL model is given,which avoids the problem of inaccurate final asset weight allocation caused by too arbitrary setting of the model in practical application.Through the empirical analysis of the Chinese stock market and the US stock market,the result shows that embedding the model-free implied volatility VIX indicator in the BL model not only solves the problem of measuring the error of investors' subjective judgments,but also improves the effectiveness of the model's final asset allocation,in the meantime,the volatility and the maximum drawdown are reduced in case of the same return,indicating that the VIX-BL model is effective,which can better realize the purpose of reducing portfolio risk without loss of income,and prove the effectiveness and feasibility of adding subjective judgment to risk control management from theory and practice.Chapter 7 is about summary and prospect,which summarizes the research,main conclusions and relevant policy suggestions of the full text,and puts forward some deficiencies in this paper,including the limitations of the risk measurement mentioned in this paper,as well as the optimization direction of tail risk measurement and the future improvement direction of risk allocation model involved in this paper.