Research on Financial Risk Management Based on VAR Model

Abstract

VaR is a widely- applied tool in the international financial risk management area, and it is also a new technical standard for measuring financial risk. VAR model was first used to measure market risk. Currently VAR analysis methods are gradually being introduced in all areas of financial risk management. VAR model in financial risk management uses more widely. Especially with the continuous improvement of the VAR model, it can be apply to financial institutions, market risk, credit risk management. And it has a wide range of applications in the liquidity risk management and finan- cial regulation and so on. Based on this, we In-depth discuss financial risk management based on VAR model. In recent years, with the rapid development of financial markets, the risks faced by financial institutions is becoming more complex. The main risk has turned credit risk to the market risk. Performance shows the composite interest rate risk, price risk and exchange rate risk. China's financial mar- ket is a developing emerging markets. It is necessary to es- tablish China's financial market risk prediction model to adapt to China's financial risk management. In the 1990s, Value at Risk (VaR) model (1-4), was introduced financial risk management. Because of its financial market risk meas- urement science, practical features, it has been generally welcomed, including financial regulators and the interna- tional financial community. To the VaR of a modern financial market risk measure- ment, management methods may be different market factors, the risk of different combinations of assets to be integrated sum. Fully consider the interaction of the various sources of risk, to better reflect the dynamic impact of the financial market risks between complex structures, to get a more accu- rate estimate of the risk of exposure (5-8). Based on this, we In-depth discuss financial risk management based on VAR model. So that we deepen the VAR model used in financial risk management.