Application Of VaR Method In Risk Measurement: The Case Of The Chinese Open-Ended Funds

China's first open-ended fund, Hua'an innovation securities investment fund, was formally established on September 11, 2001, declaring a new period of China's investment funds industry. After just a few years of development, the open-ended funds have replaced the closed-end funds, indicating a major development direction of China's investment funds industry. And, the more generalized open-ended funds—LOF and ETF were derivative shortly.The VaR method is widely accepted by international investment community. It is a quite inviting risk measuring technique for quantitativly analyzing the market risk of our country's open-ended funds. Considering our country present market environment, the market risk is the most important risk which is faced by the open-ended fund, and liquidity risk is one kind of manifestation of the market risk. It is found that VaR calculation results based on the distribution of the GED is better than the normal distribution and t distribution. The tail of the normal distribution is too thin, which underestimate the risk in the comparatively high level of confidence, while the tail of the t distribution is too thick, which overestimate the risk.Considering the special nature of China's investment environment, it is necessary to utilize the unconditional standard deviation andβcoefficient methods are needed when using VaR measure the market risk. Our country's stock market is much volatile, which is easy to be impacted by policy factors. This thesis proposes a combination ofβcoefficient and VaR methods, thus the fund's market risk is more comprehensively assessed to ensure the effective application of VaR. Finally, through a comparative analysis on two types of funds' risk by employing data of five fund management companies, it is found that the impact on the fund's risk is significant because of the forms of organization, trading mode options of traditional open-ended funds and listed open-ended funds. Listing open-ended funds do not show the innovative superiority of trading system, which implys the neccesarity of further reform and standardisation.