Risk Management Of Investment Fund Under VaR Model

Financial risk refers to the uncertainty or volatility on future earnings of financial products,especially also refers to the market risk.So how to measure the market risk scientifically and effectively has become the key point in financial risk management.There are three general steps in risk management:risk identification,risk measurement and risk controlment.Risk measurement is the quantitative analysis and assessment of the risk,which directly determines the effectiveness of the risk management methods,so the risk measurement is the foundation and core in risk management.For the measure of financial market risk has two basic tasks:find an effective index to measure of the market risk and establish an effective model corresponding to this index.Since 1994,J.P.Morgan presented the RiskMetric method based on VaR model,for its simple calculation and precise definition VaR model has become the standard model for risk measurement.In this paper,we use VaR model to measure fund risk,and improve the VaR model in aspects of the distribution and characteristics of fund returns as well as the volume and liquidity risk of fund itself.First,we consider using VaR model to replace the standard deviation in Sharpe ratio,which can measure the down-side risk of fund rather than overall risk.Second,the VaR value estimated by EGARCH model based t distribution can represent asymmetric and leptokurtic features of fund.In addition,the return of fund often show a autocorreltion phenonmenon.There is no doubt that the VaR model has the characteristic of autocorrelation.Therefore,the CAViaR model can also be used in the study of calculating the VaR value.Then,we put volume variable into above model for a more overall evaluation of loss risk.What's more,Sharpe ratio combined with liquidity risk will reflect the diversity of fund risk.Finally,we choose 15 representative funds to examine our models,and the results are as follows.The t distribution can better describe the leptokurtic and thick tail features of sample funds returns.Besides,the parameter of EGARCH model based on the t distribution is not zero,which means that the sample funds returns have asymmetric impact on variance.The VaR values estimated by CAViaR model have good performance in all aspects,which proves that the CAViaR method has some advantages.Finally,we use the returns,standard deviation,VaR values,CVaR values,liquidity risk of sample funds and Sharpe ratio combined with volume and liquidity risk to evaluate fund performance,it turns out that the revised Sharpe ratio can better accord with the actual situation.