Application Of VaR Based On Monte Carlo Simulation To Real Estate Market Measure

Since the reform and opening took place in China, the rapid development of economy and the acceleration of urbanization process have made the housing demand become the most basic need for the inhabitants of cities. And along with the steady increase in the residents' income and demand, the need of real estate market enhances unceasingly which causes our country real estate industry has a huge development space. The real estate industry has been a pillar industry in the national economy for it has features of great relevancy and powerful leading force.However, since our country housing commercialization is not to be long, the real estate market is far from standard to some extent. A series of problems are still exist, such as soaring housing prices, supply structural imbalances, overheated real estate in some cities, nonstandard developments and transactions. All these questions give the development of real estate bring of tremendous risk. Therefore, it is necessary to study the risk management method to weigh our country real estate industry risk and to adopt the approach or the way to dissolve or spread the risk.This thesis puts the VaR method that is widespread in the financial domain into real estate risk measure domain which is different from the traditional real estate warning method that just make qualitative description of the risk situation. Through unifying the actual situation and comparing the merits of the three methods(i.e. Historical Simulation, Variance-covariance Method, Monte Carlo Simulation ), the article finally decides using the Monte Carlo Simulation to calculate the VaR value.The paper mainly includes:The first part: Introduce the meaning and survey of the paper generally, and give the main research technique and the paper framework.The second part: Introduce the basic theory of risk and risk management, and carry on the qualitative description through the concrete data of the current real estate industry risk.The third part: Expatiate the concept and fundamental of VaR, and then introduce three main computing methods and one way which deals with extreme situation.The fourth part: Establish the VaR model of weighing the real estate risk. Use Group Method of Data Handling when simulate the relationship between the inspection object and the market factors, then carry on the comparison through a concrete example with the multi-dimensional linear regression.The fifth part: Conduct the empirical study by Jinan real estate industry. Apply the Group Method of Data Handling to get the linear equation between the added value of real estate industry and each explanatory variable through the 12 years' data in Jinan from 1995 to 2006; Use Crystal Ball software to do 5000 times Monte Carlo Simulation then calculate the VaR value of the added value of real estate industry according to the linear equation and the statistical distribution characteristic of the explanatory variables; finally take a pressure test according the Central Bank raising the interest rate frequently. The paper draws a conclusion that the risk in the real estate market of Jinan is little and the development tendency is good.