Research For The Risk Of Foreign Exchange Reserves In China

China's foreign exchange reserves in early 1995 are more than 500 billion U.S. dollars, to the end of 2009 reached 22,000 million, less than 20 years,China's foreign exchange reserves rose by 4 times. China's current account and capital account `s surplus has created the long-term sustained growth of China's foreign exchange reserves.This excessive growth makes our country quickly became the leader in the international foreign exchange market, but also provides a lot of problems and challenges to the management of foreign exchange reserves.In July 21,2005 China reformed the RMB exchange rate system, the RMB rate will never peg to the dollar, but adopted a system, which refers RMB rate to package currency, bases the exchange rate on the relationship between supply and demand in market, and is a dirty float rate. The beginning of the RMB exchange rate's marketization, not only increased exchange rate risk, but also increased the risk of our country's exchange reserves. For developing countries, we can't use well-developed and effective international financial markets to hedge exchange rate risk, only improve the structure to maximize risk reduction.This article cites the Markowitz mean-variance portfolio model, while absorbing the Heller-Knight in their coauthored article "Reserve-Currency Preferences of Central Banks", which indicated that Structure of a country's reserve currency was not only determined by the exchange rate arrangements, trade and balance of payments structure also played an equally important role. On this basis, this paper establish the optimal mean-variance to the currency structure of foreign exchange reserves, employ quadratic programming to calculate the optimal currency structure of foreign exchange reserves. The model's estimation relates to, Australia, Korea, Canada, the United States, European Union, Britain, Japan and Hong Kong's national currency exchange rates and trade structure. For determination of income in this mean-variance model, this paper used the country's imports and exports series. For the determination of risk, this paper used the exchange rate sequences. Risk analysis on the optimal currency structure of foreign exchange reserves, plays a vital role in predicting China's foreign exchange reserves. Through a series of testing, this paper establish the univariate GARCH (1,1) model and the multivariate GARCH model. Through employing quadratic programming function[x,fval,exitflag,output,lambda]=quadprog(H,f,A,b, [], [],1b),this paper calculates our country's optimal currency structure of foreign exchange reserves.