Cross-species Arbitrage Risk Measure Based On VaR Method

China's futures market has been established more than 10 years. In recent years, we can see a continuous growth of China's futures market transactions and a higher transaction each year. Futures transactions has the following features:Only small amounts of money can do big deal, futures trading market is a strong "leverage effect" market. Leverage affords larger returns to investors but also amplify the risks facing investors. Futures trading is a market with great risk. With the development of the futures market,more and more companies and private investors participate in the futures trading. No matter what for their purpose,the companies and investors must pay serious attention to the risk they are facing. In particular, investors in the process spread arbitrage activities which due to arbitrage portfolio volatility is low, the advantages of limited risk arbitrage spreads often overlooked in the concern of market risk. In fact, margin trading through the market,, even if the combination of low volatility arbitrage may also give investors a huge loss for leverage risk has been expanded in the futures market. We should have a full understanding and qualitative understanding of what type of the risk and the resourses. Some quantitative tool to quantify the risk, relying on quantitative means to adjust their trading strategies should also be using in order to achieve the optimal combination of risk and return.Cross-species spread arbitrage trading can be indirectly determines the important indicators of the carry trade gains.This article attempts to spread the use of different commodities, as a cross-species spread arbitrage risk measure, the indicator integrated into the VaR risk measurement system in order to spread arbitrage portfolio against market risk effectively measured. This article first introduces cross-species spread arbitrage, risk arbitrage types of cross-species and the major sources of risk, notes the connotation of arbitrage mechanism for cross-species.Finally, through the spread of soybean and soybean meal sequence analysis of the rate of return can be found soybean and soybean meal futures contracts yield spreads are not normally distributed but with a sequence of spikes, thick tail features, and there are significant GARCH effects. Based on three kinds of distribution with GARCH and ARARCH model test of VaR calculations, APARCH-GED model in three kinds of confidence level are passed the inspection, but also closer to the actual failure rate than expected failure rate.APARCH-GED is a good measure of cross-species sets of benefits of risk.