China's Commercial Banks To Market Risk Management, Econometric Research, And Based On The Var Methodology Of Empirical Analysis

The commercial banks were originally given birth together with risks, and "running business of risk" is the fundamental means by which the commercial banks are making their profit. The financial risks are spreading worldwide, resulted by the processing of the financial globalization; hence the commercial banks have to face the consequent surge of various risks. As the marketization procedures of interest rate and exchange rate are being accelerated in China, market risk is becoming one of the main risks the commercial banks take.Comparatively late did the China's commercial banks get down to do researches on the market risk control, the theories and management level are much less developed compared with that of their oversea counterparts. Now China's financial industry is completely exoteric to the world, so the commercial banks need badly to strengthen themselves while competing with the oversea banks. And the best way to boost risk management capability is to study the theories and experience from the oversea advanced banks. China's commercial banks are just starting utilizing the method of VaR which is positively recommended by Basel Committee, while other oversea advanced banks have adopted it widely for a long time.Initiated from focuses on the market risk the commercial banks face and the main problems raised from market risk management, this paper further emphasizes the importance of doing researches on China's commercial bank market risk measurement and control. Introducing theories on measuring and controlling commercial bank market risk systematically, this paper pays much attention on analyzing VaR method and ARCH class models. In the conclusion part, the paper verifies the feasibility of the VaR method in the domestic interest rate market by analyzing SHIBOR logarithm daily yield using EGARCH model. According to the positive analysis, we can draw a conclusion that using the model of EGARCH(1,2)-GED is appropriate to depict SHIBOR logarithm daily yield and estimate the future market risks.