Risk Management Of Chinese Security Investment Funds Under The Extreme Circumstances

Recently, the security investment funds have developed dramatically, which became the major components of the security market, to meet the needs of the mass investors. At the same time, as the market risks increase significantly, the risk management of security investment funds attracts more and more attention of the financial institutions and investors.Value at Risk is the most advanced and popular financial risk management technique at present, which has incomparable advantages over the traditional risk management tools. However, the most popular computation method of VaR is based on the assumption of the normal distribution, which has nothing to do with the risk of the extreme bad circumstances in the markets. When the market suffers the significant bear trends, the tradition methods of VaR computation underestimate the risks. Furthermore, some researchers reveals that the investment returns in reality, do not subject to the normal distribution. And then, researchers propose quite a lot of methods for the estimation of the fat tail of returns distribution, which are the effective compliments for the risk evaluation. The extreme value theory is one of them.This article systematically introduces the theory frame, the model and the parameter estimation methods of the extreme value theory, based on a comprehensive review of the references all over the world, and taken the daily return data of the HUAXIA CHENGZHANG Fund for the computation of the VaR, using the Var-Cov method, historical simulation method and threshold model method with the extreme value theory. After comparing the different results from these three methods, it is found that the Var-Cov method underestimates the VaR, but the extreme value method manage to get more precise results, which is consistent with the results from other scholars, and shows the advantages of the extreme value method in the application for extreme risk evaluation.The positive analysis of this article discusses the application of the extreme value theory on the risk management of the security investment fund, taken this for an example, and aims to provide a reference for the risk management system of security investment funds under extreme conditions in Chinese financial institution.