Construction Of The Comprehensive Index Of Market Interest Rate Risk Based On Extreme Value Theory

With the gradual deepening of interest rate in Chinese market, interest rate risk is be-coming more and more serious, and researchers pay more attention to the risk assessment of the interest rate. In this paper, we study the multiple factor extreme risk based on the extreme value theory and Copula function, aiming for constructing the risk index of the market interest rate. This paper selects four important interest rates in the financial market, including overnight Shibor,7 days Pledged Repo Interest Rate,1-month bonds yield to maturity and the 10-year bonds yield to maturity. Firstly, the extreme value dis-tributions of four kinds of yields of interest rates are obtained by threshold model, and the VaR value and ES value in different confidence levels are calculated on the basis of this. The results of the test show that the VaR value based on the extreme value theory can cover the actual loss well. In this paper, we will regard four extreme value distributions as the marginal distributions, and introduce the extreme Copula function to describe the dependence between the marginal distributions, and obtain the joint distribution of the four kinds of interest rate. Finally, we use the SCR standard method in Solvency II to construct the risk comprehensive index of the market interest rate, and construct the risk early-warning index based on the EMP method.