VaR,CVaR And Value Evaluation Under The Modle Of VG

Financial risk is a certain amount of financial assets in future periods possibilityof loss in expected income.The financial risks'exsisting is an important feature ofmodern finance markets,and any kind of economic entities that related with financialactivities are facing financial risks. Financial risk management is the people throughthe implementation of a series of policies and measures to control financial risk inorder to eliminate or reduce the adverse effects of behavior.The basis of market riskmanagement and the key are the measurement of risk.In order to accurately measurethe risk,it is necessary to fully consider the issue of return rate distribution. In factthe distribution of financial reward series often represents the feature higher peakand fat tails,so its distribution patterns are more complex. In 1990, Madan andSeneta first proposed Variance Gamma process(referred to as VG process),and usedthis process to describe the volatility of stock returns. This article describes the VGprocess is defined as follows:Suppose W(t) is the standard Brownian motion,γ(t;1,ν) is the process of in-dependent gamma increments with mean t and varianceνt.Let b(t) = c +θt +σW(t),Where c,θ,σ(σ> 0)are constants,claiming thatfor the Variance Gamma process,referred to as VG process.Whenθ= 0,Xt is calledthe symmetric VG process.When c =θ= 0,is the VG process which first proposed by the Madan andSeneta [32]. In 1991,Madan and Milne[41] used this process as a model of theunderlying asset returns,and established VG European Option Pricing Model, but did not form a complete analytical form;Wei Xi[39] in the Madan and Milne's workbased on the complete analytical form is derived. Wei Xi[39] in the Madan andMilne's work based on the complete analytical form is derived.When c = 0,is Madan,Carr and Chang[33] defined the VG process, they giventhe European option pricing formula in this environment; Jinping Yu,XiaofengYang,Shenghong Li[40] is in this environment using linear programming methodfor solving the optimal portfolio.From this we can see,in this article,VG process considers the location parameterc,is a more general form of VG process.This paper is to study its application in thefinancial markets.In the third chapter,we use VG distribution to describe the returndistribution,and then analyse individual financial assets'VaR and CVaR; throughmultivariate normal Copula function constructs correlation of stock market,then cal-culats the VaR and CVaR of portfolio,empirical analysis shows that when the VGprocess,four parameters are not set its value,depicting the distribution of financialassets yield only more accurate,that the four parameters are indispensable. Chapter4 using Variance Gamma process to take the place of the Brownian motion of BlackScholes geometric Brownian motion model.Talking about the applying probabilitymethod to give a fixed strike price the Europeanize option pricing formula,and pre-senting the numerical results.