Application Research Of VaR In China's Securities Market Risk Analysis

With China's entrance to WTO in the end of 2001, the pace of the finance globalization and market integrity will speed up and the turbulence of the financial market in China is also increasing. It is a task in the top of the agenda of central bank and securities regulation institutions of every country. Stock market is always regarded as an area with most potential financial risk. So it is also a frontier of financial risk prevention. Stock market is a kind of market where high return come together with high risk. And the stock market in China is a new, developing and immature market. Accordingly, the risk of this market is outstanding. With the entrance to WTO and upcoming international capital inflow and outflow and the introduction of new technology, the weakness in the institution of our stock market and the shortage of regulation skills and methods will make the risk more complicate and internationalization. As the core of the financial risk management, the measurement of financial risk directly determined the validity of the risk management and prevention. It is necessary to do the empirical studies on the stock market in China with modern investment theory, construct risk measurement system and imply valid risk control.With the development of modern financial investment theory and econometrics, there are various measuring methods for financial risk. Through the study and comparison of these methods, the mainstream measuring technology, VaR(Value at Risk)is taken as the major methods in these paper. Stock market risk is analyzed by historical simulation method, analytical method and MonteCarlo method with the data of Shanhai Stock market from 2000 to 2001.After that, the validity test and transverse comparison among these three methods is given with the data of Shanhai Stock market from 2002 to 2003. And the most feasible method of risk measurement in stock market in China is proposed. Finally, the concrete implication of VaR method to the securities market risk management is discussed.