Stock Risk Analysis Based On Conditional Value-at-risk

Risk is defined as volatility of future,for example,future return and liabilities,value of assets.Measurement of financial market risk is measuring loss resulting from unfavorable change.The methods of risk measurement include mean-volatility method,sensitivity analysis, volatility analysis and VaR and CVaR.The risk measure method of Conditional Value-at-Risk is developed on basis of the shortcoming of Value-at-Risk method,which is raised by Rockafellar at 1999.The implication of CVaR is the conditional loss over VaR of portfolio,which reflects the average exceed quota. CVaR method reflects underlying loss better than VaR method.CVaR has many applications,such as measuring credit risk,deciding inner risk capital, asset allocation,banking supervision.This paper focuses on the applications of CVaR in the portfolio theory.In the course of researching,I do my best to use the methods of systems theory,induction and deduction,comparison and empirical analysis.Firstly,the paper totally introduces all kinds of traditional risk measure methods and then analyses the defects of these methods,then puts forward CVaR risk measure method,introduces and analyses the definition, the parameter selecting,the calculation,the properties and applications and so on.The conclusion is that CVaR is better than the traditional methods and CVaR method is a coherent risk measure method.For the return sequence do not obey normal distribution,peak and thick tail,balance effect,then using APPARCH model calculate the volatility of return sequence,and introduce the characters of APPARCH,and then calculate the VaR and CVaR based on t distribution, GED distribution,normal distribution.Then compare the dominance of VaR and CVaR under different distributions.Secondly,the paper studies the application of CVaR in portfolio theory,the other is the optimal selection of portfolio on based of CVaR constraint.And using empirical analysis proved these two problems.In fact the implications of these two problems are identical.They all use CVaR to guide invest decisions.Thirdly,the paper simply analyses the problems of the use of CVaR in China and puts forwards some suggestions.