Value At Risk Measurement Method And Its Application

Limitations of traditional risk measurement methods are obvious, such as sensitivity analysis reflect only the linear relationship between the factor and the market price, ignoring the impact of non-market factors. Does not reflect option nonlinear financial instruments. Study on fluctuation deviation description income does not reflect the loss of direction and deviated from the specific level. As scientific and technological leaps in recent years, the risk measurement also creates many new methods of measurement, which is studied in this paper of value-at-risk method, the VaR risk measurement methods as a new method, born from the outset attention and application. Now is the major research methods. Many large banks and enterprises are using VaR as a sign of the risk assessment.So what should VaR calculated? Traditional VaR calculation method have a lot of problems, such as: Returns distribution problems, traditional VaR calculation by default yield normal distribution, however, normal distribution clearly is not well reflect the yield spike characteristics of heavy-tailed distributions. The next: Calculating value-at-risk in General to exercise all of the calculated data fitting, obviously too heavy workload and measurement inaccurate. Therefore, in this paper, we use extreme value theory and Quantile regression methods to estimate VaR.In his paper, considering the closing price of Shanghai Composite Index, Shenzhen Component Index, Nikkei 225 and S & P 500 four indexes. Using extreme value theory, quantile regression methods as well as traditional distribution methods to estimate the VaR. To find in different markets which VaR estimation method is more appropriate and effective. The conclusion is Shanghai’s market is more suitable for using quantile regression estimation, and the Shenzhen stock market, the Nikkei and S & P are more suitable for using extreme value theory approach to estimation. And we can see the Nikkei and S & P are more mature than the domestic market, less affected by the current earnings. That is to say there is more speculation in China’s domestic market, also show that many investors choose to make short-term investments.