The Application Of Measuring The Financial Market Risk By Value At Risk In China

Risk management technology is growingly one of the most important research objects in the fields of finance engineer and finance management; and risk measurement is essential and basic in risk management. Only depending on measuring risk stake correctly, risk management could be achieved. Risk management includes market risk management, credit risk management and operator risk management, etc. Due to the restriction by acquiring data and the possibility of implementing empirical analysis, the thesis focuses on the risk measurement of financial market and, on the aspect of empirical analysis, the measurement of financial risk in China's stock market especially. Because of great changes of external conditions including the fluctuation of exchange and interest rate and some financial affairs which exerted dramatic impacts, the risk management of financial market has drew more and more attention since 1970's. The risk measurement technology on financial market has experienced changes from the simple and static method initially of asset liability management. Nevertheless, there is no essential transformation. The variance method used by the H.Markowitz as the standard of measuring risk ushered the risk measurement technology on financial market in a brand new field. Then, many experts such as William Sharpe and John Lintner, used βcoefficient and half variance to compute financial risks. But none of them gained the satisfactory results. Concerned on the realistic life, risk means loss rather than profit. In 1994, the VaR method was invented by JP Morgan to compute financial risk, which was more simple, clear and reasonable in contrast with variance method. Recently, there were many papers about the VaR method written by oversea scholars. Nowadays, it is also a hot topic on how to structure the suitable model to measure financial risk in financial research field in china. The thesis mainly discusses the definition, background and application of VaR; and several models to compute VaR are introduced. When we calculate VaR by using parameter method, the distribution hypothesis and the selection of models are somewhat subjective and sometimes depend on experiences. Therefore, this thesis:①analyses GARCH group such as GARCH,EGARCH,PARCH, and computes VaR based on Index of Shanghai Stock Exchange, Shengzheng in normal distribution separately (and t-distribution, GED distribution). In order to make a comparison, the author computes VaR in Riskmetrics model and analyses the difference with GARCH; ②Assets portfolio risk management is the key question in investment fields, so how to establish suitable model to measure portfolio risk is a hot topic in financial research field at present. The thesis also applies the increment VaR method to measure the risk of an assumed investment portfolio, to explain how to adjust the composition of the portfolio in order to reduce the risk of the portfolio.