Interest Rate Derivatives Products Of Var Scenario Simulation Study

The Subprime Mortgage Crisis is an ongoing financial crisis triggered in the United States, with major adverse consequences for financial markets around the globe. Peoples felt that absence of regulations in financial derivatives market is one of the reasons to lead crisis. And the financial derivatives risk measurement and management becomes more important. At the same time, the Interest Rate Derivatives Market occupies a larger proportion in the Financial Derivatives Market, so the field of finance pays more attention at their Risk Management. For China, the Interest Rate Derivatives Market is just beginning, its productions only including Bond Future, FRAs and Interest Rate Swap etc, But, as the trading volume of derivatives are growing, the Interest Rate Derivatives Market play a important role in our financial market. Currently, as the marketization of Chinese interest rate market, additionally, to cope with the economic crisis the central bank to adjust interest rates several times, those make the risk of interest rate derivatives is gradually increased. So, how to management the risk of Interest Rate Derivatives is one of the significant topics for the Investors.Base on the relative papers reviews, this papers summarizes the basic VaR Models including Historical Simulation Method, Monte Carlo Simulation Method, Delta-Gamma Method, Scenario Simulation Method and some others methods. The comparison focuses on the applicability of different VaR methods on interest rate derivatives. Currently, in the extremely volatile financial market circumstances, one conclusion that can be drawn is that the Scenario Simulation Method can provide the Reasonable Interest Rate Derivatives VaR in time. So the Scenario Simulation Method is selected to measure the interest rate derivatives VaR. And the method is expanded to better meet the current financial market environment. Additionally, there is demonstration research for building scenario matrix. This dissertation mainly makes the following innovation works: 1, Expands the building scenario matrix of the Scenario Simulation Method to include abnormal distribution scenario matrix, constructing scenario matrix under the currently market data and building the scenario matrix with Extreme Value Theory and adding expected Factors to the scenario matrix construction. 2, Make a framework of construction scenario matrix to unify the Scenario Simulation Method and the Stress Test. it is significant under the extremely volatile financial market.