The Application And Comparison Of VaR And CVaR In The Financial Risk Management

Risk is defined as volatility of future, for example, future return, future value of assets and liabilities.Measurement of financial market risk is measuring loss resulting mom unfavorable change. The methods of risk measurement include mean-volatility method, sensitivity analysis, volatility analysis and VaR and CVaR.The series of return rate is of volatility clustering and time-varying variance, and don't subject to normal distribution. So, learned person use GARCH model based on t-distribution and Generalized Error Distribution to describe return rate series.The paper calculates volatility by means of AR-EGARCH-M model based on normal distribution, t-distribution and Generalized Error Distribution. And then, calculate and compare VaR and CVaR.Lastly, the paper uses VaR and CVaR to portfolio risk management and assets performance estimation. The paper calculates marginal VaR and CVaR, component VaR andCVaR, RAROC and RAROC_CVaR...