Research On The Market Risk Measurement Of Commercial Banks In China-based On VaR

Market risk refers to the adverse effects on future market prices (interest rates, exchange rates, stock prices and commodity prices) uncertainty of the business to achieve its stated objectives. Since China’s accession to WTO, the openness of China’s financial sector gradually strengthen, commercial banks are also facing increasing market risk, therefore it should adopt an accurate way to measure and manage market risk.Based on the provisions of "Law of the PRC on Commercial Banks", China’s commercial banks is not yet directly involved in the stock and commodity markets (not considered in this article), So market risks faced by China’s commercial banks are primarily exchange rate risk, interest rate risk of transaction accounts and bank account. Therefore, based on the framework and principles of the Basel Ⅲ, it applies VaR model advocated by the Basel and model with GARCH and EGARCH, but through testing it finds GARCH model is not suitable for China’s interest rate and exchange rate markets.Thus it finally establishes VaR-EGARCH model, quantitative analysis interest rate risk and exchange rate risk of commercial banks with Eviews software, and construct model of market risk warning system.Finally, on the basis of empirical research, Through the study of the theory of market risk management, according to the market risk management framework, based on the status quo of China’s commercial banks, it makes recommendations countermeasures of commercial bank market risk measurement work to provide a certain significance on establishing and improving a comprehensive risk management system of China’s commercial banks.