The Study On China Life Co.Ltd.’Srisk Of Investing In Stock Market Based On Cvar Theory

As an industry managing risks, the life insurance industry controlling actively and effectively the risks of the life insurance funds investing in stock markets has a great significance for protecting the solvency> improving risk management capabilities and promoting the healthy and stable development of the insurance industry. As China’s largest life insurance company, China Life Insurance Company Limited’s (referred to as China Life Co.Ltd.) premium income or the size of funds accounted for more than30percent of the life insurance industry in China. The research on the measurement of the China Life Co.Ltd.’s risk of investing in the stock market, not only has reference value for other life insurance company in China, but also represents the whole China’s life insurance industry at a certain point of view.Firstly, this paper introduces the VaR model which is the basis of the risk measurement method CVaR model and analyze the VaR model’s defect. Then this article elaborates systematically CVaR model and discusses deeply parameter selection and calculating method, which is the theoretical basis of the subsequent empirical analysis. Secondly, this paper summarizes the situation of China’s life insurance funds investment, statistics and analyzes China’s life insurance funds investment structure and income. This article has a detail introduction in the investment structure and investment profit and loss of China Life Co.Ltd. for recent years, so we can see that risks exist in China Life Co.Ltd.’s funds investing in the stock market. This article selects data of stock invested by China Life Co.Ltd. for the empirical analysis.Based on the characteristics of leptokurtic in stock return series, we lead the GARCH model into CVaR model, constructing the famous CVaR-EGARCH model to measure the risk of single stock,which calculates the investment risk of the single stock more accurately. In the light of the combination of CVaR value, China Life Co.Ltd.’s investment risk reserve can be extracted. The marginal CVaR value and the ingredient CVaR value could reveal the portfolio risk, and the performance evaluation index (RAROC) could assess the risk-benefit of each stock. In the light of comprehensive risk information above all, China Life Co.Ltd. can adjust the share of stock to achieve the goal of controlling the overall portfolio risk. Finally, according to the empirical results, there is a summary of the results achieved by this article author, who had made recommendations about risk management of investment in the stock market to China Life Co.Ltd. and also make some recommendations for promoting the application of the CVaR model in China.