The Theoretical Analysis Of The Models Of The Volatility And Their Application To Risk Management

To measure and model of the volatility of the financial assets is one of the best important objects in area of finance, Financial decisions are generally based upon the trade off between risk and return;the econometric analysis of risk is therefore an integral part of asset pricing, portfolio optimization, option pricing and risk management. This paper has presented some example of risk measurement that could be the input to a variety of economic decisions. The analysis of ARCH and GARCH models and their many extensions provides a statistical stage on which many theories of asset pricing and portfolio analysis can be exhibited and tested.The main work in this paper is first to discuss and study models of Volatility and then apply them to the investment decision analysis. We first introduce models of ARCH and GARCH about the definitions and properties of them. Then we expand some of the important models. Then we apply some special and important models to value VaR. Lastly, we come to the conclusion that the estimated models fit in with history dates very nicely.The paper contains 6 chapters: chapterlis quotation, chapter2 mainly discuss the definitions and properties of ARCH. Chapter3 mainly discuss the definitions and properties of GARCH. Chapter4 mainly applied them to computer the value of VaR. Chapter5 is the conclusion. The last Chapter is the references.