Application Of VaR In Risk Management For China's Securities Investment

As a method which has been developed completely,VaR is also the tool for international financial supervision and management.Nowadays,it has been used in our country's financial agencies.Moreover,the VaR method can denote the market risk intuitively while based on the theories of probability and statistics.In this way,VaR points a figure simply for the risk hiding in the financial products.In view of the huge volatility in China's stock market,the author attempt to construct a simple VaR System and take it into application for the analysis of stock index.This article introduces the application of some modish VaR method in our country's securities market.Those methods are applied into the Shanghai Stock Exchange 180 Index for empirical research and comparative.And the author just hope to choose the one which is the most suitable for the sample of China's stock market for common use.In the article,we focus on the application of GARCH model,Extreme Value Theory, the algorithm of EWMA and Kernel estimation in dynamic VaR calculation.And the improvement of EWMA algorithm was raised.The Shanghai Stock Exchange 180 Index is choosed for empirical study while we used the close index up to April,2009 which is the latest.The character of the return rate series' distribution is analysised by Eviews 5.0,and the test for ARCH effection is taken as well.Matlab is taken into the estimating of VaR in GARCH model and Extreme Value Theory.When it comes to the algorithm of EWMA,the author attempts to find a suitableλthrough the Kupiec likelihood ratio test for the in-the-sample data.The non-zero assumption is taken into the condition mean to improve the EWMA algorithm.And it is proved that the new method makes a better performance in the choosed sample. The Kernel estimation is taken into historical simulation method,we try to use the exponentially weighted rate replace the real rate of return before estimation.And this is proved to performance better.