Study On The Application Of VaR Technique In Risk Management Of Security Investment Funds

With China's entry WTO, financial market will finally open to foreign financial institutes in all around way. Financial institutes in China face two problems of existence: How to maintain domestic market and extend to overseas market. Only by making effects to developing more excellent skills in selecting and managing risk can they solve the above problems under the background of global finance.It's inevitable to introduce VaR technique, an advanced risk measure method as well as an international financial supervising tool, into our financial institutes. This thesis establishes relative VaR model and managed risk with VaR, taking the security investment funds as the studying goal, which is not only beneficial to strengthen the ability of risk management and improve their competitiveness in worldwide range, but also provide valuable experience to other non-banking financial institutes to manage risks by VaR, with great reality significance.Firstly, this thesis introduces the background and current status, demonstrated basic progress,compared the advantages and shortcomings of VaR calculating methods, proposed the optimization issue of VaR and demonstrated its application in financial risk management.Secondly, this thesis summarizes the definition and classification of risks of security investment funds, introduces some usual risk measure indexes and theory for risk elusion and analyses the current situation of risk management of security investment funds in China. As for how to introduce VaR into our risk management, this thesis explores deeply from two sides. Using VaR to measure market risk of security investment funds in China and analyzed the risk structure of portfolio by component VaR, taking Fund Jinghong as an example. By peeling off risk weight of each asset in portfolio, we disposes the structure of market risk of security investment funds and proves that VaR can help funds managers more effectively control assets risks.Based on the above, we continue to explore a very important aspect in risk management of security investment funds, that is assets allocation. The thesis proposed a model of asset allocation we required, How to establish the portfolio model which can achieve the maximum profits given a restrictive VaR value. Principle hypothesizes are as follows: (1) a best portfolio model will meet that the maximum expected loss will not exceed the restrictive VaR given the holding period and believer level; (2) to define risk acceptance extent according the restrictive VaR, not the commonly used expected effects theory.