Research On Measurement And Management Of Market Risk In Margin Trading

As a form of stock trading, margin trading started early and has been developed well in western countries. Margin trading started at March,2010 in China which was relatively late. With the customer scale expanding and the margin balance increasing, margin trading has become one of the focuses in China’s stock market. At the end of 2014, China Securities Regulatory Commission (CSRC) has punished and warned 8 securities companies due to illegal operation and ineffective rectification in margin trading. The study of margin trading will help to make up the deficiency of market risk management theory and provide the reference theoretical framework for securities companies. The study also has great practical significance in creating investment channels, reducing financial risks and increasing incomes for securities companies, and furthermore boosting a healthy development of stock market.Based on the international and domestic existing research results, focusing on the topic of market risk in margin trading, taking the Chinese reality into account and conducting the study by risk identification, risk measurement and risk control, this paper divides market risk into volatility risk and liquidity risk, uses the GARCH-VaR model to measure market risk and verified the validity of the model, puts forward a dynamic risk control system by the conduction of Z-SCORE model according to financial crisis theory, in the hope of protecting the interests of investors, helping securities companies to control the market risk effectively and ensuring a long-term, effective and healthy development of stock market.