A Research And Application Of VaR And CVaR In Investment Portfolio

In the financial life,there is no risk-free investment.So in order to profit from the financial market,it is necessary to have enough vigilance and understanding of financial risk,and have effective calculation of investment risk.Firstly,this paper introduces the value at risk(Va R)and conditional value at risk(CVa R).Value at risk(Va R)is one of the most important ways to calculate risk,it can quantify the size of the risk,so that investors can have more intuitive understanding of the size of the possible losses.It means the greatest possible loss of assets or portfolio in a certain investment period,due to the normal fluctuations in financial markets,during a certain period of time in the future under a given probability level(confidence level).Today,Va R has become an important tool to measure market risk,compared with the traditional risk measurement,Va R is concise,clear,and comprehensive.CVa R means the average losses when the potential loss of assets is more than the Va R value under a given confidence level.CVa R can capture the average loss in extreme situations.In the empirical part,this paper firstly uses the historical simulation method to calculate the Va R and CVa R of China Growth Enterprise Index.Secondly,we use the Monte Carlo simulation method to calculate the Va R and CVa R of China Growth Enterprise Index,which uses the GARCH class model.Finally,according to the advantages and disadvantages of the two methods,an improved historical simulation method is proposed in this paper to measure the risk of China Growth Enterprise Index.By comparison,the improved method is more flexible and effective in predicting the risk,and can provide a new and more accurate method to estimate the risk for investors.