The Market Risk Measurement Research Of China Commercial Bank Based On VaR

The core competitiveness of Commercial Banks is the risk management ability. Whether commercial bank is willing to undertake the risk, whether commercial bank can manage the risk properly, will decide the profit and loss and the life and death of commercial bank. After 1980s, with the relaxations of the commercial banking management control and the irreversibility of mixed management, banking experiences a crisis--the relaxing controls of Interest rates, the rising of deposit rates, the exacerbation of financial competition, and the emerging of interest risk and liquidity risk. Large quantities of banks go bankrupt in this crisis. In this situation, people gradually realize that market risk seems more violent than credit risk, and the damage degree of market risk is higher. With interest rates liberalization and the continuous development of RMB exchange rate reform mechanism, the risk environment of commercial Banks in China has changed dramatically. Credit risk is no longer the biggest enemy in banking business. The market risk together with the credit risk became the important content of the commercial bank risk control. After entering into WTO, the further opening of financial market leads to a national competition which brought more market risks to our Commercial banks. Within the secondary loan crisis which originated from US's real estate overlying mortgage loan market that depresses the world financial market, the harm has not been eliminated until now. It brings severe disaster to the world economic. In this context, risk management, especially market risk becomes the focus of attention of the financial market again. In the present situation, how to analyze the market which China's commercial Banks are facing, how to find the cause of market risk, and how to establish and perfect the market risk management mechanism and enhance anti-risk ability, strengthen the market competitiveness, become an urgent task.This article is in view of many questions which our Commercial banks are facing in the current management. Take the market risk which the Commercial banks face as a breakthrough point. Take economics, finance and banking, risk management science and quantile regression as theoretical principle. Through the method of logical reasoning, this article describes the economic phenomena that have already occurred and also explains the real-life economic activities. And this article measures the risk of our country's commercial banks by applying VaR model which is based on Semi-parametric Approach (quantile regression). Try to take VaR model as basis, discuss the feasible proposals of building our country's commercial bank market risk management system which is in accord with the actual circumstances of our country's financial market. More specifically:First of all, the article carries out thorough theoretical analysis on the market risk of commercial banks from two aspects—the meaning and the causes of the market risk. Taking the realistic performance of our country's commercial banks' market risk as a point of penetration, the article points out the relative performance of the market risk of commercial banks, namely non-performing loan ratio, low capital adequacy ratio and low profitability and etc. The market risk of China's banking has become more apparent; our financial circles increase the breadth and depth of the opening-up; the requirement of the new Basel Agreement is more normative and the competition in the banking sector is intensifying. This article further analyzes the necessity and urgency of strengthening the market risk precaution of our commercial banks.Second, by analyzing and comparing the financial market risk measurement techniques and through balancing the advantages and disadvantages of different measurement techniques, I choose the VaR Model. And I do some estimation by applying the most advancing Semi-parametric Approach (Quantile Regression). On the Basis of sufficiently researching on the concrete content and characteristics of VaR and its application on risk measure area of international banking market, the approach is put to use to survey and evaluate our commercial bank interest risk so as to lay an important foundation for evaluating our commercial bank market risk accurately.Finally, based on the above study, this paper presents the study conclusions. VaR Model approach as a wonderful risk management tool has been put to use in many countries whose financial markets are developed, but it is still in its infancy in China. Applying the model on China's commercial banks' daily market risk management, there are still very much constraint conditions. Our government and regulatory agencies have been active in the development and improvement of financial markets to further promote market-oriented interest rate reform and the reform of the exchange rate mechanism, meanwhile, adopt positive policies and measures to encourage commercial banks to be bold to introduce advanced methods of risk measurement methods. Favorable external environment will prompted our commercial banks to create favorable conditions actively to introduce the VaR model approach on market risk management. So that the commercial bank's market risk management can be more effective. The introduction of VaR Model approach will play a major role on market risk management of commercial banks. Its measure on interest risk and exchange rate risk makes risk management can be quantified. Risk management is more a manifestation of the dominant role of bank earnings. Its introduction and application is inevitable on the path of banks' risk management.