The Application Of VaR Model Into Oil Future Market: An Empirical Study On Future Trade Of China Aviation Oil

Value at Risk (VaR) is one of the important methods used in the risk control of financial tools investment. Investors can use VaR method to asses and calculate the risk exposure of their assets before they adjust their investment portfolio. In this way, the risks will be possibly evaded. And the VaR method can also help investors to measure the real risk against their own risk capacity so that they can make sound investment decision to reduce blindness and investment losses. China Aviation Oil (S) Corp Ltd went bankruptcy in November, 2004 due to great loss in the oil derivative trade.This article takes Nov.25th, 2003 to Nov.30th, 2004, when China Aviation Oil (S) expanded its trade volume gradually, as the research period. And through the calculation the VaR of CONC oil future in New York Mercantile Exchange, the article is trying to prove the VaR applicability in the oil future market.Through the analyses, it can be concluded that as a market risk assessment method, VaR can be used in the oil future market to measure the market risk and predict future risk possibility under common circumstances. But at the same time VaR itself has some deficiency in the risk analyses of oil future investment.