A Study on Measuring Market Risk Based on Fat-tailed Distribution
Tong Yong-huan · Journal of the Graduates Sun Yat-Sen University · 2008
After 1970s,the collapse of fixed price system,financial innovation and the globalization of financial market increasingly aggravate the volatility of financial market.Market risk has been the most important form of financial risk.The ability of market risk management has been one of essential capacities gaining the competitive privilege for financial institutions.And VaR Model is the quantitative analysis tool for market risk.Traditional calculation of VaR is based on the hypothesis that the return rates distribution obeys the normal distribution but the empirical studies show the return rates distribution is fat-tailed and has skewness.Here we study the new calculation of VaR based on the skewness and heavy tails.There are five chapters in this thesis.Chapter 1 introduces the basic definitions and theories of financial risk,financial risk management.Chapter 2 introduces the VaR Model.Chapter 3 gives empirical studies on Chinese stock market's skewness and heavy tails.Chapter 4 studies the VaR calculation based on skewness and heavy tails.It introduces a kind of modified Weibull distributions.Chapter 5 summarizes the whole article and puts forward some viewpoints for future research based on the conclusion of this thesis.