The Risk Measurement Of Shanghai Interbank Offered Rate Based On VaR-GARCH Model

Shanghai Interbank Offered Rate is set up to take two important historical mission. First, it became the benchmark interest rate, promoting China’s interest rate market. Second, let the country receive RMB pricing in RMB internationalization process. Currently, the Shanghai Interbank Offered Rate (hereinafter referred to as SHIBOR) plays an increasingly important role in the pricing of financial products. SHIBOR has gradually become an important part of the money market, and has formed a benign interaction with the other part. Some financial products also gradually formed market-oriented pricing mechanism that based on SHIBOR pricing mechanism, such as rediscount bills, notes repurchase, debt products as well as some financial innovations. In recent years, inter-bank financial institutions that involved in the inter-bank market are always increasing, which has almost covered all banking financial institutions and most of the non-bank financial institutions. Interbank market is a relatively high-risk market, which is the result of a highly developed economy and the credit level of capital.The unpredictability and strong volatility of interbank market has the price of high-risk irrational market fluctuations, the result is bring unexpected loss to the major players in the interbank market. In the background of SHIBOR’s further strengthen reference, it will be more sensitive to the changes in supply and demand response funds.This paper selects SHIBOR market from October 8,2006 to December 31,2014 as the research object. Try using the ARMA-GARCH model family to fit overnight lending rate risk. Empirical analysis found that daily return series has a fat tail characteristics and significant volatility clustering characteristics, and do not distributes normal. We trying fitting daily return sequence with ARMA-GARCH model, the results show that GARCH models can well eliminate the volatility clustering. From GARCH model estimation and testing to see, EGARCH-(1,1) model and EGARCH-M (1,1) model based on GED distribution are more effectively to simulate daily return series. Studies have shown that degree of SHIBOR market is a relatively low, and market efficiency is not high. SHIBOR daily yield sequence has significant leverage, and bad news has a greater impact, which is at odds with the previous number of papers to the conclusion.Finally, this paper introduces the Kupiec test method failure rate to test the accuracy of model. The results show that the stability and accuracy of EGARCH model is good, which can be used to simulate and predict SHIBOR Day yields. When assuming random disturbance obey generalized error distribution (GED),Using GARCH (1,1) and GARCH (1,1)-M model fit Shanghai Interbank Offered Rate to measure of market risk are more accuracy. Finally, based on the actual situation, the paper expounded the necessity and recommendations of commercial bank interest rate risk control from both commercial banks and regulators.