Improvement Of Var Method And A Posltlve Analysis Of It

Financial innovation and financial globalization have made the business activities of modernfinancial institutions increasingly exposed to more and more market risks. Since the 1970s, theglobal financial market has been through the rapid development, but also shown unprecedentedvolatility, which resulting in worsening global financial market risks. In the new century, Chinesefinancial market continues to reform and speed up the opening, and is gradually integrated withthe global financial system; stock index futures and the recent opening of margin trading fullyillustrate the trend. Chinese financial market's reform and opening up have brought us greatopportunities, but also make Chinese financial institutions face the challenge and competitionfrom foreign financial institutions. Therefore, Chinese financial institutions should actively learnadvanced market risk measurement theory and technology, rapidly increase the capacity of marketrisk management, and improve their competitiveness relative to foreign financial institutions.This article first describes the method commonly used to calculate VaR, illustrates the stepsof historical simulation method, the advantages and disadvantages of historical simulation, andthen chooses the commonly used method of financial institutions, historical simulation as theresearch object, proposes new method based on historical simulation. This new method gives thevolume and time weights to the historical data, and applies the new method to the data from thesecondary market. The result shows that, because the model considers the weight of volume andtime, new method reduces the influence of yield under situation of low-volume, and the influenceof early historical data. Therefore, through the analysis of the result, the new method has a clearadvantage relative to the traditional historical simulation and parameter method.