An Empirical Research On Market Risk Of China's Convertible Bond Based On The VaR Method

Convertible bond is increasingly favored by investors in terms of its unique structural advantages that has the character of both debt and stock.Also,the reputation,"minimum guaranteed by the bond,profit can be expected by the conversion",attracts the overwhelming majority of investors in the market.However,convertible bond is confronted with various complex risk factors with this particular structure,which resulted in the risk measurement of convertible bond becoming more difficult by the mutual effect from those risks.On account of those factors above,this paper takes the convertible bond market in China as the research object.Then,exploring the risk measurement model of convertible bond market in China by using the daily trading data of the market and mathematical model.On this basis,this paper attempts to measure the overall risk level of convertible bond market in China,and to study the risk characteristics of convertible bond and exchangeable bond.This paper consists of six chapters.The first chapter introduces the research background and significance of this paper,and summarizes the related literatures at home and abroad.In the second chapter,the collected data was used to conclude the characteristics of the first and second market of China convertible bond.Meanwhile,to analyze the complex investment risks that convertible bond investments faced,and to introduce the important risks as a key point,which clarifies the significance of the risk assessment on convertible bond.The third chapter summarizes the different calculation methods of VaR and use the parameter method to measure the risk level of convertible bond in China.Moreover,the GARCH family model based on different distribution is introduced to simulate the fluctuating route of it more accurately.In the fourth chapter,the closing data of China's CSI index from January 2,2004 to December 30,2016,total 3158 trading days,is taken as the sample.After that,on the basis of statistical test,used the parameter method based on GARCH family model to measure the VaR.Finally,doing the back testing.After those test,it is found that the GARCH model under t distribution will be overvalued to the market risk,while the results of the three models under the normal distribution and the GED distribution are similar.Except the prediction results of the EGARCH(2,2)model under GED distribution are slightly higher than 5%,the other models are able to better predict the market risk of CSI.From the perspective of risk control and management,the prediction of TGARCH model under GED distribution is the optimal result.Chapter five tries to analyze the differences of the risk level between convertible bond and exchangeable bond through two sets data of those two with same rating.The empirical results show that the risk level of convertible bond is less than that of exchangeable bond.Therefore,it is necessary to control the risk more strictly when investing in convertible bond.In conclusion,the sixth chapter summarizes the research results in this paper and puts forward the shortcomings of it.