Study On Risk Measurement Of China Stock Market Based On VaR Method Of GARCH Family Model

VaR technique is a new risk management method that has been developed in 1990's. As a quantitative model to measure and control financial risk, compared with traditional models, it is easy to understand and apply so as to have more practical significance.China's stock market has been established for tens years, in which time, though much has been achieved, compared with the highly developed western securities market, China's stock market need more correction and regulation. Thus, there are more upheavals in China's stock market, which is prone to exposing overdue risks to investors. Therefore, a optimal method is needed to measure the risks. Stock index futures is at hand so it is significant to study the risks of securities market, especially the risk of stock-index futures.The paper, to begin with, introduces basic methods to calculate VAR, then makes a comparison in facet of the advantages and disadvantages of them. Finally Shanghai stock index, Shanghai stock 180 index, Shenzhen element index and Hang seng index are studied and the profitability of them is tested through normality test, stability test, GARCH-LM test. The outcome of the tests indicates the earning ratio of those markets presents skew and distributed stably with the effect of ARCH-LM. Hereby, GARCH mode is suitable to be applied to calculating VaR of China's Market. Also, the paper fits GARCH,TARCH,EGARCH model and the GARCH mode under the hypothesis of normal distribution, t distribution and GED distribution to study the alternation of VaR under those hypotheses. Kupiec test is adopted to test the accuracy of the mode to find good model for each securities market. In the end of the paper,compared the model with history simulation method ,find that the model is better than history simulation method.