Abstract
Value-at-risk has become the main instrument for the measurement and management of financial risks. With innovative construction of multi-level capital market system and gradual improvement of functions of financial system in China, financial risks demonstrate some new uncertainties. With regard to quantitative analysis and the management of risks in Chinese financial market, adoption of some methods for quantification of value-at-risk is of greatly importance in the fields of both theory and practice. The constant improvement in research of theory and practice concerning financial development gives birth to all kinds of new instruments for measurement and management of financial risks, among which value-at-risk is a common new instrument applied in measurement and management of modern finance. In this paper, an empirical analysis is conducted on quantification of financial value-at-risk based on Two-factor pricing model and GARCH model.
Highlights
Financial risks management is an integrated systematic project which mainly consists the stages such as risks identification, risks measurement, management decision-making and implementation and risk control
Multi-resolution estimation is an important composition of Two-factor pricing model
Through analysis of the weigh of single assets investment, it reduces the error of Two-factor pricing model during use, lowers the risks in financial development, enables more accurate coping with uncertainties of market and maximizes and effective role of value-at-risk during financial development
Summary
Financial risks management is an integrated systematic project which mainly consists the stages such as risks identification, risks measurement, management decision-making and implementation and risk control. Relying on quantitative analysis, it measures the possibility, range and extent of losses caused by various risks, whereby providing reliable quantification basis for risks management. Since financial risks management is an integrated systematic project, its actual application involves many aspects and stages. Complete macro control at all stages will safeguard more precise control of financial risks, maximum actual effect of financial management, reasonable prediction and prevention of various risks during financial development, avoid economic losses as far as possible, reduce the range and extent of losses and provide more accurate reference basis for construction quantitative model of financial value-at-risk and for empirical analysis. Construction of Two-factor Pricing Model and Empirical Analysis of Valueat-Risk
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