The VaR Research Of The Shanghai And Shenzhen 300 Index Products

Shanghai Stock Exchange and Shenzhen Stock Exchange issued the Shanghai and Shenzhen 300 Index In April 8, 2005. The launch of the index promotes the indexes products, including the existing Shanghai and Shenzhen 300 Index Funds and the Shanghai and Shenzhen 300 index futures which will be allowed late and so on. Index products have a lot of risks, investors and regulators need to analysis, modeling and forecasting its risk in order to manage it.In this paper, first is the Shanghai and Shenzhen 300 Index (399300) yield sequence analysis, including the smooth of the sequence, the autocorrelation of the sequence, the conditional heteroskedasticity of the sequence; modeling, including the simple form of Autoregressive(AR) model, Autoregressive Conditions Heteroskedasticity (ARCH) model, Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model; the tests of the model's results, including the Autocorrelation of the residuals sequences and the Autocorrelation of the residual squares sequences; based on the models to forecast mainly the one step forward conditional variance. Thus it gives the methods and procedures for the Shanghai and Shenzhen 300 index products yield sequence to analysis and model. Second is that, in the real case, investors commonly use methods of portfolio investments, and thus requires the use of multiple sequences analysis. In this paper, the binary sequences of the VANKE A stock (000002) yield and the Shanghai and Shenzhen 300 index yield will be analyzed and modeled. In the modeling process, this paper uses three types of models which are commonly used in the recent researches in these kinds of cases, Constain Correlation model, Time-varying Correlation Coefficient model and the model which uses the Cholesky Decomposition method. At the same time, bases on the models to forecast, mainly the one step forward conditional variance and covariance matrix as well as correlation coefficient. Finally, on the bases of above, this paper uses the VaR methods to model and calculate the risks of the portfolio investments and testing back of the models. Thus it gives the methods and procedures for the Shanghai and Shenzhen 300 Index products, as well as portfolio investments which contain the Shanghai and Shenzhen 300 Index products to analysis its risks. Also, the case of bankruptcy of Barings Bank which was the global financial alarming will be analyzed by VaR. In the end conclusions of this article, a number of shortcomings will be discussed.