Empirical Study On Risk Measurement Based On VaR Of Aluminum Future Market In China

Since the 1970s, along with economic globalization and deregulation of the finance in the world, the financial derivative market developed rapidly. It provides hedge instruments to participants, at the same time, it becomes a root that results in high fluctuation in financial markets, which occurred to increase the complexity of risk management. Among numerous current risk management approaches, VaR (Value at Risk) method which was put forward by JP Morgan Company is accepted in general. It could describe the market risks of various financial instruments with specific, concise terms. Then it can help the manager to know the risks brought by portfolios which he holds at a certain time. The paper makes the continuous earning ratio of aluminum which is representative in Shanghai Future Exchange as research samples, establish GARCH models, do a empirical research on risk measurement of futures market in China.This paper is divided into 5 chapters. Chapter 1 analyses the futures market risk in China. Chapter 2 discusses the main of measuring futures market risk, and chooses VaR to do empirical study in this paper. Chapter 3 sets up the corresponding GARCH models based on VaR which are used to risk measurement in the futures market. Chapter 4 utilizes GARCH modes on the basis of normal, t and GED distributions to measure VaR of the aluminum contract. Then the paper tests the validity of various models. Chapter 5 discusses the applications of VaR method in our futures market, finally the paper puts forward proposals to manage risk in our futures market.The highlights are: Combining qualitative analysis and quantitative analysis, the author resorts to international prevailing research method of VaR models to measure risk in our futures market. By contrast with previous domestic papers in this field, this paper pays more attention to the technical details in establishing continuous array of futures contract and choosing GARCH models which suit the commodity futures market in China.