Font Size: a A A

Value At Risk (var) Model In China's Pension Fund Investment Risk Control

Posted on:2004-12-12Degree:MasterType:Thesis
Country:ChinaCandidate:Y LinFull Text:PDF
Abstract/Summary:PDF Full Text Request
VaR (Value at Risk) is a newly appeared financial risk management tool in recent years, which is a method that uses statistic thought to evaluate the financial risk. In the past several years, VaR has been more and more valuable with the extensive application, becoming a kind of technique to measure market risk in common use, particularly in the aspect of financial derivative products. With the development of financial engineering and the innovation of financial tool, the financial risk problem attracts people's attention. So, the importance of VaR has been recognized. There is a lot of financial groups, investment organizations and pension fund companies abroad adopting VaR method to control the financial risk. In China, besides the payment to beneficiaries currently, China's pension fund has raised a flood of funds, facing the pressure to preserve its value and to increase in value. For the sake of the safety of pension fund, Chinese government regulates that the funds can only be in bank and purchase the government bond. The narrow outlet for investing makes the fund hard to preserve and to increase in value. In fact, this is primarily because of having no good risk management technique. Therefore, it is more urgent for the managers of China's pension fund to control the investment risk. Thus, it is necessary to introduce the advanced financial risk management tool VaR into China's pension fund investment realm, and combine the method of VaR with the traditional asset and liability management .At the same time, it is necessary to establish the early-risk-alarming index system and FCE (Fuzzy Comprehensive Evaluation) Model for the investment risk of China's pension fund. Accordingly, to attain the goal of controlling risk and to guarantee the beneficiaries, it is imperative to rebuild compensationmechanism for investment risk of China's pension fund.This thesis analyzes according to the above-mentioned logical way of thinking. The thesis article is divided into five chapters.The first chapter is about the basic theory of VaR, including the definition, characteristics, practical meaning and calculating method of the model. It also introduces the localization of VaR model .In Chapter Two, the author studies the application of VaR Model in China's pension fund investment risk control. Being a tool of quantitative analysis, it can measure market risk, liquidity risk, credit risk and portfolio risk, and can also be applied to monitor the market risk. So, the managers of pension fund know how much the investment risk they undertake. At the same time, the VaR helps the managers to proceed the risk budget, risk limit and to distribute the risk capital. Asking for help from the model of VaR, the governors of pension fund can establish the risk quota system, which equals to establish the alarming line for the investment. At the end of this chapter, the author introduces VaR as a tool for disclosing the risk information and the evaluation of investment performance. In conclusion, VaR is important for the analysis of decision-making for pension fund investment.The fourth chapter is about the integrating ALM (asset and liability management) with VaR. ALM is a common problem for all financial institutions including pension fund, the core of ALM is interest-rate risk management. Owing to the limitation of ALM, the conformity of VaR with ALM is imperative. Finally, the author gives the system of VaR operation mode in ALM, including the risk control mechanism, which is a key point of the thesis.Chapter 5 is the core of the thesis, and also the key point of the thesis. In this chapter, author primarily studies the risk control alarming system for China's pension fund on the basis of VaR Model. This chapter focuses on the theory in the former chapters in risk control practically. Atfirst, the author points out the constructing idea and designing principle of investment risk-control alarming system for China's pension fund. Following this way of thinking and principle, the author designs the risk-...
Keywords/Search Tags:VaR(Value at risk), pension fund, risk budget, FCE model, risk-compensation mechanism
PDF Full Text Request
Related items