The Risk Measurement And Performance Valuation Of Domestic Money Market Fund Based On Var

According to the international development experience and the domestic financialstructure and money market, Chinese money market fund has a broad range of developmentprospects. Generally speaking, money market fund has strong liquidity and low risk, soevaluation of it often simply consider the income aspect and overlook the risk factors. But thepractice of international financial development proofed that the risk of money market fundcannot be neglected. Especially domestic monetary market and related aspects is not matureyet at the moment. It’s more necessary to consider the risk factors for domestic money marketfund. Currently our money market fund’s performance evaluation mostly accords to incomeindex and ignores risk index. Most of the risk research stay at qualitative analysis and thequantitative analysis is also simple. Therefore, this article combine with the actualcharacteristics of our money market fund and introduce the VaR measurement method toevaluate domestic money market fund considered risk factors.Firstly this article analyze the income character of our money market fund. The resultshow that the rate of return has fat-tailedness and volatility clustering and the distribution ofreturn is non-normal. According to the results, this paper introduce VaR method to measurethe risk of domestic money market fund. When choosing calculation method of VaR,considered above results, this paper establish GARCH model, TARCH model and EGARCHmodel based on normal distribution, t distribution and generalized error distribution. Theexamination result of these models show that such GARCH models are able to describe thefat-tailedness and volatility clustering of return. Based on these analysis, this article select thebest GARCH model to calculate the VaR of funds. According to VaR, the VaR of moneymarket fund are variant. This result also further proof that considering risk factors is verynecessary for the performance valuation of money market fund.Based on the VaR of money market fund, this text create RAROC index and modifiedSharpe index and combine with three traditional risk adjustment index and average returnindex to comprehensively evaluate domestic money market fund. The result show thataverage return index is really not comprehensive. And different index produce differentevaluation results. The difference most come from the risk factors and risk index. This showsthat to a certain degree, risk is a dominant factor in money market fund’s evaluation. This alsoproof that risk is a very important factor and shouldn’t be ignored. In the practical application,analyst can choose appropriate index to evaluate money market fund’s performance accordingto personal risk preference and study purpose. And VaR means risk of loss, so the RAROC index and modified Sharpe index which both based on VaR are more significant for investors.