The Gold Market Risk Management Research Based On Var-garch Model

Gold is one of special and scarce commodites equipped with both commodity and financial attribute.As an important hedging tools, gold palys critical role in financial investment activity and is an important part of national foreign exchange reserves.Gold is still a hard currency under the current global monetary system.By analyzing the history of gold price movements,we can see that the gold price rose from $35/oz to more than $1400/oz since the Bretton Woods system collapsed,it is nearly 40 times higher,however, the process is not easy, but full of large or small volatility. Although as an investment hedge, gold prices still experienced great ups and downs and a substantial deviation from our expectations in the case of financial crisis of 2008. Therefore, the risk management of gold investment is particularly important with the increasing investment in gold today.This article aims to quantify the risk of COMEX gold market fundamentals. First, it state the necessity for gold market risk management by introducing a note of the trend of gold price and then make a literature review on gold market or price.Then, it make a deep research on the historical development of the global gold market,global gold market developing trends and factors affecting the the gold price; The next, VaR risk management theory,VaR and GARCH models were studied; Then, we made the empirical test one 9144 JCP day yield of COMEX gold spot marke from January 2 1975,to October 21,2010 using VaR-GARCH model and found that GED-based distribution of VaR-GARCH (1,2) model can be more effective on the VaR value forecast, VaR-GARCH is a better way to estimate the gold market risk. In addition, VaR-GARCH conditional variance model was also analyzed and we found that the high variance of intensive regional and high-risk areas the real market is the corresponding.High-density areas often means the emergence of new market uncertainty, such as oil crisis, the Iraq war, the Gulf War, the Asian financial crisis and the global economic crisis, which raised the market risk and it is consistent with the actual situation..Therefore, it shows that the conditional variance forecasts can help predict changes in market risk. Finally, the recommendations were given on how to invest in gold for the investors.