The Application Of VaR Method In Tail Risk Measurement Of Chinese Stock Market

At present,China’s stock market is accelerating the speed of opening up to the world,and the financial market is more vulnerable to the impact of the global market.However,China’s financial risk management system is not mature.How to measure the extreme risk of China’s stock market is a problem with both theoretical and practical significance.As an significantly important financial risk management tool,VaR method has been widely used in developed financial markets in Europe and America.In this paper,VaR method is applied to measure tail risk in China’s stock market,and its applicability is analyzed.Furthermore,the impact of 50ETF Option and 300ETF Option on stock market risk is analyzed.Specifically,combined with China’s national conditions and the actual development of the financial market,this paper applies the VaR method to study the return rete of Shanghai Securities Composite Index,Shanghai Stock Exchange 50 Index and Shanghai and Shenzhen 300 Index.The specific research conclusions are as follows:firstly,during the sample period,the return series of the three indexes are stationary,but they do not obey normal distribution,and show obvious characteristics of "peak thick tail" and conditional heteroscedasticity.Therefore,we need to use GED distribution hypothesis to characterize the return series of the three indexes;secondly,Shanghai Securities Composite Index,Shanghai Stock Exchange 50 Index and Shanghai and Shenzhen 300 Index will have different reactions to the positive impact and negative impact.The positive impact will make the daily closing price volatility of Shanghai Securities Composite Index greater,and the negative impact will make the daily closing price volatility of Shanghai Stock Exchange 50 Index and Shanghai and Shenzhen 300 Index greater;thirdly,when estimate the VaR value of Shanghai Securities Composite Index,Shanghai Stock Exchange 50 Index and Shanghai and Shenzhen 300 Index,TGARCH(2,1)model under GED distribution assumption performs better than other models which is the most suitable model;finally,under the assumption of normal distribution,t distribution and GED distribution,the launch of 50 ETF Option reduces the volatility of Shanghai Stock Exchange 50 Index,the launch of 300 ETF Option reduces the volatility of Shanghai and Shenzhen 300 Index,and its hedging effect effectively reduces the financial risk.This paper concludes that VaR method as a risk management tool has a wide application space in China’s major financial markets,and the launch of option products is conducive to reducing market financial risks as a whole.The regulatory authorities should further improve the structure of financial market trading products,prevent and resolve financial risks by reform and innovation.