The Study On The Measurement Of RMB Exchange Rate Risk Based On GARCH-CVaR Model

Since May 2014,the dollar has been strong against other currencies,which means that the dollar has entered a long-term appreciation channel.Under this new background,the yuan entered into a long devaluation cycle.In today's complex international economic situation,the structure of china's economy is in transition and China's foreign trade experienced a change from a huge trade surplus to a balanced current account.Accordingly,china'sforeign exchange reserves are dwindling,which experienced a high-speed increase before.The rates of international foreign exchange market fluctuates rapidly,the game between the main powers on exchange rate become more frequent,which puts the foreign trade enterprises at a more severe risk of foreign exchange.These enterprises are subjected to foreign exchange market volatility.This requires us to further study the risk measurement of the foreign exchange market in the new situation.Domestic and overseas scholars have carried out deep research on the related fields of financial market risk from various aspects.A variety of methods have been built to measure the market risk of stock,fund,bond etc.Among those methods,the Va R method is one of the most popular,and it has been the new international standard for risk management.Although there are some defects in the VaR method,for instance,it does not satisfy the axiom of consistencyand can't predict the extreme risk,but it does not hinder the application of this paper.In order to solve these problems,foreign scholars have carried on expansion of VaR method,built the CVaR method which is proposed to predict the risk of extreme cases,the CVaR method can satisfy the axiom of consistency and it has been widely used in many research fields.Therefore,on the basisof contrasting the VaR methodthis paper chooses the CVaR method to measure RMB exchange rate risk.This paper focuses on the RMB exchange rate against the Dollar.By the means of establishing the logarithmic return of the RMB exchange rate against the dollar in daily time series,this paper builds the model of GARCH and EGARCH to measure the VaR and CVaR under the assumption that the yield obeys the normal distribution and student's t distribution and GED distribution.The final results show that the CVaR method based on the EGARCH model under the GED distribution can be used to describe the extreme risk in the RMB exchange rate market.