The Fluctuation Characteristic And Risk Investigation Of Gold Future Market Based On VaR-GARCH Model

Since the gold futures come into the market in China, the trade volume was increasing rapidly, and the scale of market has expanded as well. At the same time, the functions of market were shown, such as price finding and dispersing market risk. Additionally, the gold property was widely influenced by gold futures.The stability of gold market is one of the factors which impacts the health of one country’s financial market, therefore, the development of gold future market of China is one of the facts of strive for the right to speak and the right of pricing in international gold markets.However, since the gold futures were listed in Shanghai Futures Exchange in2008, its price has fluctuated with the economic situation over the world. Subprime crisis, European debt crisis and the regional battles always could be the factors that affect the price of gold, which bother the participants in financial market. The characteristics and rules of Chinese gold futures market are necessary for the participants to recognize. Balancing and analysing the fluctuation and effectiveness of the market, as well as the risk, which could reduce the information asymmetry, enhance the efficiency of financial market, and promote the development of the market. Therefore, it is more important to manage the risk of gold investment. In this study, the trend chart of gold futures of Shanghai Futures Exchange will be presented at first, which will demonstrate the necessity of the investigation of gold futures risk management, meanwhile, a literature review will be summarized which includes the studies of gold futures market from domestic and abroad authors. Secondly, the risk of Shanghai Futures Exchange (such as the risk of price fluctuation, the risk of liquidity, credit risk, operation risk and legal risk) and an explanation of common investment misunderstanding will be claimed, moreover, the function of Shanghai Futures Exchange will be presented, which included hedging, price finding, speculative hedging, saving transaction cost, organize and mange market, pricing right and sending message. Thirdly, there will be a summary of the theories which are related to VaR risk management and GARCH models (include EARCH model, GARCH-M model, TRACH model and GARCH model portfolio), subsequently, based on quantitative analysis of the risk of Shanghai Futures Exchange, empirical analysis of closing price and algebra yields of770trading days(from2011to2014) will be studied which adopts VaR-GARCH model. The data accord to the price of the largest standard of each day. After the comparison, EG ARCH model is verified that is more effective to the VaR value forecast in gold futures market, and VaR-GARCH model could be a better method for estimating the market risk. After the analysis above, the results would be basically equal with the requirements, the calculated value of VaR is valid, which claims that the EARCH model can estimate the financial market of gold futures market. Therefore, in the condition of fluctuation of the gold price and international financial market at the moment, when we are in the progress of calculating the VaR value and controlling managing the risk, the relatively high confidence level, and the reason is the higher of the confidence level, the times of VaR be beat are less. This could effectively avoid the huge risk that caused by the dramatic shock of gold market. Through the examination of samples, the result can be presented that the skewness of the daily yield from gold futures market has moved to right and had peaks. According to the regression results of GARCH model, each parameters is obvious.The sum of the coefficient of VaRiance formula is0.095+0.856<1, which means the market is wide and steady, the strike from price fluctuation will last long, and the market risk is dramatic as well. And according to retest of VaR, the failed days can be calculated. Finally, the conclusion and several advises will be pointed out for the investors about how to control the risk of gold futures investment. Such as paying attention on the elements that influence the gold future price in China, which includes the price trend of gold in international market, the gold price in China, and the change o fRMB rate as well. Moreover, once the market has been changed, pay attention on control the lost and the risk in time, and also the market risk will be high when hold the space overnight, and last avoid trade frequently and familiar with the rules in financial market.