Study On Measurement Of Exchange Rate Risk In China Commercial Banks Based On VaR-GARCH Family Model

October,2008, the financial crisis broke out, which was triggered by the subprime mortgage in USA. A year later Euro crisis exploded. The economy of the world is experiencing the most serious challenges since the70s of20th century. There is much severe turbulence in the international financial markets, exchange rate movements become much more complicated and fluctuation of exchange rate is unprecedented. In such turbulent international financial environment, our commercial banks cry for solving this problem which how to measure and manage fluctuations of foreign exchange rate risk of our commercial banks effectively.The article used the combined methods of empirical and the theoretical study. It put much efforts into the study of the main method of measuring the foreign rate risk-Value at Risk(VaR), applied VaR-GARCH family model with measurement software-Eviews software, USD/RMB exchange rate, EUR/RMB exchange rate, JPY/RMB exchange rate were studied. Besides, it made empirical study in foreign exchange risk of commercial banks on2006to2010foreign exchange rate of our country’s commercial banks. The results showed that the optimal measurement method of USD/RMB exchange rate risk was GARCH-M(1,1) model based on t-distribution; the optimal measurement method of EUR/RMB exchange rate risk was IGARCH(1,1) model based on GED-distribution; the optimal measurement method of JPY/RMB exchange rate risk was TARCH(1,1) model based on GED-distribution. In the end of the paper, compared the optimal models with variance-covariance and history simulation method, find that the optimal models are better than variance-covariance and history simulation method. It Verified the effectives and feasibility of the optimal models.The paper had five chapters. The first chapter is the introduction; the second chapter of the article is about the measurement of exchange rate risk in commercial banks and the theory of VaR-GARCH family model; the paper mainly analyzed the necessity and the of measurement of exchange rate risk based on VaR model in our country’s commercial banks in the third chapter; the forth chapter is about the empirical study on measurement of exchange rate risk in China commercial banks; it made a conclusion and outlook in the last chapter of the article.