Integrated Risk Measurement Of Our Commercial Bank Based On Copulas Function

Since1990s, with the Pace of economic globalization and financial liberalizationaccelerating, the risk management of commercial banks efced tow real scenarios: oneis that the financial industry is developing towards the trend of conglomeration andinternationalization, and the other is that the use of information technology isbecoming more and more widely. All of this make the risk characteristic ofcommercial banks rfom simplification to diversiifcation and complicatioa Basel IIalso explicitly points out that the previous pure credit risk management mode devertsto the enterprise-wide risk management of credit risk, market risk and operational riskin the risk management of commercial banks, and shows the correlation of the risks.The diversiifcation and dependency of risks put higher requirements forwards to therisk management of commercial banks.On the other hand, mixed operation is thedevelopiiKnt trend of21century, and China has also emerged financial congofmerates.An inportant feature of banking sector under mixed operation is the new types anddependency of risks due to the combination of different financial institutions, so thesingle risk management mode could not cope with the risks faced by the company.Integrated risk management has been paid to more and more attentbn, and becomethe development trend of the risk management of modern commercial banks.In the ifrst Place, this paper resumptively analyzed the basic connotation andefatures of credit risk, market risk and operational risk of commercial banks, as wellas their respective measurement methods and models. And then the integrated riskmeasurement of commercial banks has been quantitatively studied following by thetop-down approach of integrated risk assessment methodology. Copula function is aneffective method for measure the integrated risk，which can deseribe the dependencystructures of different types of risk, also separately study their marginal distributionsand dependency structures, as well the choice of marginal distribution is not restained.This article commits Copula theory and CVaR technology to integration measure of credit risk and market risk in commercial banks. The ifve two-dimensional Copulafunctions in Elliptical Copula efmily and Archimedean Copula efmily andtime-varying SJC-Copula have been used to describe the dependency structures ofrisks indifferent types, as to build its joint distribution function. Then Monte Carlosimulation is used to estimate CVaR of integrated risk under different dependencystructure. By the conclusion, it can be known that the simple additive method fordifferent risk values otfen used by the financial practitioners and regulators willover-estimate the overall risk value, which resulting in many problems brought byinappropriate provision for regulatory capitalThese research results will widen ideas and methods of the risk management ofrChinese commercial banks, and deeped the depth of the risk research. And this paperprovides a number of inportant theoretical foundation and useful design concept forthe risk managers carrying out practical work，and has inportant practicalsigniifcance.