Research on the Risk Measurement for the Futures Market of Bulk Commodity – Taking the silver futures as the example

Abstract

The futures transaction of bulk commodity has played an important role since China became the global manufacturing center. Taking the commodity futures market in Shanghai as the research objective, this article selects the price of silver futures, uses GARCH-VaR and Stress Testing to measure the risk tolerance of the market. The research result shows the silver price is fluctuated within the scope specified by the market and won't influence the stable operation of futures market. With the economic development, China has become the global manufacturing center. The trade volume of bulk commodity in China is increasing on a daily basis, and the status of Chinese futures market is growing rapidly in the global futures market. Futures market, similar to other financial market (such as stock market and foreign exchange market), faces a huge market risk. The key to study the dynamic risk transaction effect of the futures exchange lies in the ability to accurately measure the risks in the futures market. Therefore, we will explore the risk measurement for the futures market of bulk commodity in China. Currently, the financial risk measurement mostly uses VaR (Value at Risk) method produced by J.P.Morgan to estimate the risks.