Based On Var And Cvar Model Of Short-term Stock Market Risk Measure Research And Application

At present, China's financial and economic system is transformed and developed from the financial and economic system under the planned economy, and it is still under the developing stage, which is not fully mature. Meanwhile, the financial products in China are far less abundant than those in developed countries, the new mechanism is far from perfect, laws and regulations are imperfect, risk management concept and means are lagging. That financial investors enhance their profitability and investment risk management is actually the process of development, improvement and regulation of financial industries'operation and management, the process of regulating investment behavior and cultivating their concept of rational investment, and this has a positive effect to overall quality, competitiveness and strength of market risk-resisting ability of Chinese financial industries. So risk managements are objectively conducive to providing a secure and stable environment for the operation of economic entities; is conducive to lower macroeconomic volatility, which may not intervene normal production and operation too much; is conducive to the achievement of the development goals of every economic entity.Because of the higher risk associated with higher profit, the operating performance of higher returns may also indicate higher loss, therefore, the assessment of risk is considered more important. The stock market risk, the most important piece of the financial fields and the core of risk management and prevention, directly determines the effectiveness of risk management and prevention. Therefore, studying the stock market risk is of great theoretical and practical significance.Value-at-Risk(VaR) forecasts the maximum possible loss, besides the consideration as a capital reserve or hedging strategy, its feature about clearly quantifying risk is the best weapon as a performance evaluation for past. Lots of financial institutions have adopted VaR to manage their market risk soon after it was invented, including Basel Committee, the Bank for International Settlements. In fact, VaR has become the standard method to manage financial risk. Research on VaR and CVaR in foreign countries is mature and there have been a lot of technological methods. However in China the research is left relatively behind. With the future deepening of Chinese financial sector reform, the trend that domestic financial institutions establish the risk management system which is seen VaR and CVaR as risk measures in accordance with international practice will become inevitable.This paper is divided into four parts to introduce the methods of VaR and CVaR and their comparative research and application to stock market's short-term risk fluctuations in China.The first part is introduction, introducing VaR background, research aim and main contents of this article.The second part is introducing the basic theory and calculating methods of VaR in detail first, then highlighting three calculation methods of VaR: the historical simulation, parametric analysis and Monte Carlo simulation, and respectively describing their basic principles, calculation steps, the model and so on, and making comparisons to conclude that parameter analysis is more suitable, then using the normal distribution parameter method to study single asset (single index) of securities market in China to prove the VaR approach's effectiveness in dealing with a single asset.The third part firstly describes the advantages and disadvantages of VaR method and the background of CVaR ; Secondly mainly introduces the basic theory and calculation methods of CVaR, including linear programming and parametric method, and establishes a new optimization CVaR model combining the two methods in measuring the risk of short-term risk of portfolio, which considers VaR as a constraint condition, so that the two methods can be better linked when making comparisons. Then use Eviews5.0 and Excel to analyze and calculate the data, using the optimal CVaR model and parameter VaR analysis in a single asset and portfolio(index portfolio) in order to comparatively study, from which we conclude that in dealing with a single asset VaR method is fully effective for investors who prefer the risk, but for risk-averse investors, CVaR approach is a better choice because it is more prudent to deal with tail loss, and we also conclude VaR is not sufficiently effective to measure the tail loss in facing portfolio risk measurement, while CVaR method is more effective.The fourth part is about the existing problems and some advice of the application of the two methods according to China's current situation of stock market.