Abstract
In this paper, we use the futures exchange copper trading data of Shanghai as a sample for the VaR quantitative analysis. Through empirical analysis, the results showed that VaR method based on GARCH model can be a good fit in the insurance value of copper futures. Therefore, we can consider it as an important means of futures risk management in our country, and with reference t to establish corresponding risk warning system.
Highlights
Introduction of VaRVaR (Value at Risk), known as at Risk, refers to the given confidence level and the normal market conditions, investors in one day, a week, a year the biggest loss within a specified time frame, or in normal market conditions, and for a given period of time, a portfolio of VaR value loss probability.2.2
Using the VaR method to control the risk can make trading unit or each trader can clear understanding of how they are engaged in risk investment transactions and on the basis of it can be set for trading or each trader VaR limitation, to prevent excessive speculation; Second, for the company's performance evaluation
Futures companies in our country can refer to the GARCH-VaR risk prediction model which can better describe the earnings volatility clustering effect
Summary
“Futures Company’s asset management business pilot approach” with official purposes since September 1, 2012, has attracted the attention of the entire industry and was considered as the most important innovation in 2012 in the domestic futures market. Cuoco, He & Issaenko (2001) found that using VaR risk management must assess the VaR indicators dynamically depending on the circumstances, and using VaR to control trading risk effect is remarkable. Jorion’s (2005) study pointed out that Goldman Sachs, Merrill Lynch, JP Morgan et al established a set of core proprietary business VaR as risk management and control system, using Monte Carlo simulation and other modern financial technology to manage proprietary business risk, which ensures the quality of the self-employed business. Yao (2002) argued that if the company proprietary for effective risk control, certainly will form the huge losses and propose VaR method to measure the company proprietary investment risk to determine the moderate scale of proprietary investment. Li (2005) argued that the risk management system construction should include: the framework of risk management organization structure; the importance of VaR which is the core of risk monitoring system; and the construction of comprehensive risk management system, etc
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