A Study On Simultaneous Conditional Value At Risk For Exchange Rate Risk Management In Commercial Banks

With more and more exchange business being done in commercial banks,exchange rate risk is becoming a hot research topic in academic world and gettingmore attention from bank managers. At the background that traditional methodsbecome almost mature, more and more commercial banks are exploring newlymanagement tool, and content of exchange rate risk is going from just risk measuringto multi-factor simultaneously analysis. Due to the above, the thesis usessimultaneously conditional value at risk (following VaR is short for Value at Risk andCVaR is short for Conditional Value at Risk) in the research of exchange rate riskmanagement for commercial banks.At the very first, the thesis discusses comprehensively of what predecessors haveresearched in exchange rate risk management and summarizes basic theories andmanagement method of exchange rate risk including VaR and CVaR, with thefollowing representation and expounding of Simultaneous CVaR. Then the thesisintroduces multiple GARCH models used to measure Simultaneous CVaR, with thecreativity introduction of Panel-GARCH model for the purpose of simplifyingmeasure model and promoting measure accuracy. And because one of the importantaspects of exchange risk management is to choose measure model which may relatedto test of measure accuracy, the thesis create a test model based on UC test to test theaccuracy of variety models that measure simultaneously CVaR. Following the thesisbrings in mean-CVaR model that is mostly related to Simultaneously CVaR anddesigns the exchange risk management process using Simultaneous CVaR incommercial banks that combines them two, with the creatively construction of amodel to measure Simultaneous CVaR from rate to position. In empirical part after thetheoretical part, the thesis chooses daily data from the day of exchange rate reform in2005to the end of2013and main exchange position from5major commercial banks,and uses the models to measure Simultaneous CVaR of exchange rate with testingtheir accuracy which indicates that Panel-GARCH model has a well accuracy inmeasuring Simultaneous CVaR of exchange rate. Then the thesis measure theSimultaneous CVaR of exchange position using the Simultaneous CVaR of exchangerate and declares the use and advantage of simultaneous CVaR through comparison ofSimultaneous CVaR and VaR, comparison of Simultaneous CVaR and non-simultaneous CVaR and comparison among banks and different priods of time.Inthe last portion of empirical part, from a management perspective the thesis proposessome advices related to Simultaneous CVaR to promoting level of exchange rate riskmanagement in commercial banks.Above all, from mathematical tools to management application, the thesis buildsa process for exchange rate risk management in commercial banks using SimultaneousCVaR.