VaR Based On Factor-GARCH Model And Its Application In Fund Company

From the angle of internal management of Fund Company, this paper drew VaR measurement based on Factor-GARCH model into risk management of Fund Company in order to provide the decision reference to top managers of Fund Company and Risk Management Committee. The paper used the research method of qualitative analysis and quantitative analysis as well as theoretical analysis and positive analysis.The paper established a portfolio, made positive analysis, and found out that for the 95% and 99% VaR, Factor-GARCH-VaR model, Factor-EGARCH-VaR model and Factor-GJR-GARCH-VaR model in normal distribution were better than models in t distribution in stock market of china. At a 95% confidence level, Factor-GARCH-VaR model is always better than Factor-EGARCH-VaR model and Factor-GJR-GARCH-VaR model; At a 99% confidence level, Factor-GARCH-VaR mode, Factor-EGARCH-VaR model and Factor-GJR-GARCH-VaR model were probably equivalent. Using Factor-GARCH model to forecast VaR was more exact than using Delta-Normal-VaR model.Because Factor-GARCH-VaR model applied in risk management of Fund Company had more advantages that other VaR models had not. This paper applied this model in risk management of Fund Company, such as funds manager performance evaluation, optimization of investment portfolios, enactment and distribution of risk quota, risk report, watching market risk and pricing of new fund product, emphasized on funds manager performance evaluation and optimization of investment portfolios, and made positive analysis.