Research On Measurement Of Extreme Financial Risk Based On Simplified WCVaR

With the development of financial liberalization and globalization,the scale of the international financial market is increasingly growing.Since early 21 st Century,the development of computer information technology makes the financial products and financial technology innovation speed to an unprecedented height.However,the capital is always profit-driven.As a result,the nature of the financial can not be changed,and the competition of the financial industry is becoming more and more intensified.In order to obtain excess returns,traders always have to take high-risks.The invention of various financial products does provide investors with much convenience.But these products increase the speculation of the financial market at the same time,which turns out that the entire financial market is filled more unstable factors,and its volatility is increasing.Iteriorly,Dalian Securities and Xinhua Securities went bankrupt successively,and then Fuyou Securities and China Southern Securities were managed by the government.Internationally,the Baring Bank of England and the Lehman Brothers of America Closed down,and the Sovereign debt crisis was occurred among European countries recently.It was lacking of adequate attention to the risks of the traders or managements that led to these disastrous effects.Therefore,financial risk management has been becoming one of the cores of modern financial industry.Due to the complexity and fat-tail of financial markets,the commonly seen measures are not applicable to deal with the risks based on the quantile analysis.It will bring about the destructive and disastrous financial shocks since it is much difficult to predict and control the “black swan event”.This thesis focuses on the subject,mainly the following research:(1)The theoretical study of financial extreme risk.Facing the increasingly complex domestic and international financial environment,the traditional financial risk measurement method is often not enough attention to the risk of extreme environment.In this thesis,we extend and improve on the basis of the current financial risk measurement tools,and propose a simplified WCVaR model,and the theoretical derivation.(2)The empirical analysis of financial extreme risk.In this thesis,the mainstream index of domestic and foreign financial markets are used for empirical analysis,through the traditional VaR method,CVaR method and the simplified WCVaR method.The empirical analysis is divided into two parts.The first part is based on historical simulation method;the second part,we conduct the back testing of the three kinds of methods of risk measurement.WCVaR method is proved to be more cautious in the extreme case.(3)Portfolio optimization based on simplified WCVaR model.In this thesis,a simplified WCVaR risk measurement model is proposed based on the original risk measurement method.Because the model has a high dimensional and complex max-min structure,it is difficult to solve the question through general linear programming algorithm.In this thesis,particle swarm optimization(PSO)algorithm is used to solve the problem,which is a new way to solve the problem of risk measurement.Finally,through the empirical research,it's verified by the author that WCVaR has a certain application value in terms of the risk measurement and avoidance.