Study On The Foreign Exchange Risk Estimate And Measures Of Foreign Trade Enterprises Based On The VaR Method

Since July 2005, China began to implement a managed float exchange rate system,based on market supply and demand, referencing to a basket of currencies,the yuan is no longer a single peg to the dollar,the exchange rate mechanism are more flexible. The United States is China’s largest exporter,both sides carrying out import and export business are more in US dollars,with increasing appreciation of the yuan against the US dollar,foreign exchange risk faced by foreign trade enterprises have gradually increased.Coupled with the Central bank continue to expand the yuan against the dollar trading price floating range,the prices of the two-way exchange rate fluctuations increase elasticity and further increase the foreign exchange risk to the foreign trade enterprises.For sustained and healthy development, foreign trade enterprises must find a scientific and effective methods for the management of foreign exchange risk, and the core and the premise of management is to achieve effective measurement of foreign exchange risk.But at present, our country foreign trade enterprise in the aspect of risk management has developed slowly.The VaR risk value method is a new risk management tool,compared with other measurement methods, it is more accuracy and practical, the application is more wide.VaR has three kinds of basic models, historical simulation method, VaRiance- coVaRiance method and the Monte Carlo simulation method.This paper make a detailed introduction about the calculation principle of these three methods, the calculation process and their advantages and disadvantages. In the empirical part,this paper firstly starts from the hypothesis test of the model,incluing the stationarity test, normal test and the test of conditional heteroscedasticity.Results show that the log return series of Yuan exchange rate against the dollar is steady, do not accord with normal distribution, showing the peak thick tail characteristics, with conditional heteroscedasticity.Secondly,according to the central bank’s three fluctuation of exchange rate adjustment time for the node, the series is divided into four periods, followed by fluctuation for 0.3%,0.5%, 1%, 2%.In every period of volatility period, this paper uses historical simulation method, VaRiance-coVaRiance method and the monte carlo simulation method to estimate exchange rate risk of the yuan against the US dollar.Through the actual value comparison and the failure frequency approach for accuracy testing, it is concluded that with the yuan against the dollar trading band continues to expand, the fluctuations in the yuan is more flexible, model prediction accuracy decreases, from the confidence level of 99% to 95% to 90%.In the current fluctuation margin of exchange rate for the actual conditions of 2%, it suggests that companies choose under 90% or 95% confidence interval of VaRiance- coVaRiance method, and adopt the exponential moving average method to calculate earnings volatility,at the same time,choose the historical simulation method as the reference of VaRiance- coVaRiance method, compared the two results, determine the VaR value according to the enterprise managers’ s risk attitudes and preferences.Finally, based on the empirica,the paper puts forward the measures of China’s foreign trade enterprises to cope with foreign exchange risk.