The Empirical Study In Measurement Of Exchange Rate Risk In China Commercial Banks

Our country reformed foreign exchange rate system on July 21th,2005.From then on, RMB did not stare at only Dollar.It has come into being a new exchange rate system, which is more flexibility and marketable.The reform means that our commercial banks' foreign assets,foreign debts and Variety of foreign exchange position that formed in exchange rate dealing would expose in great risk.At the same time,there would be great challenge for commercial banks in the aspect of exchange rate management.As we all known,the procedures of exchange rate management mainly include:identifying foreign exchange risk,measuring this risk,choosing the method of risk management,carrying out risk management,supervising and adjustment,while the important precondition and core of foreign exchange rate risk management are the first two procedures.Therefore,our commercial banks cry for solving this problem:how to measure and manage fluctuations of foreign exchange rate risk of our commercial banks effectively in order to enhance the ability of resisting foreign exchange rate risk.The article used the combined methods of empirical and theoretical study.It started from the identification of foreign exchange risk,and then put more efforts into the study of the main method of measuring the foreign rate risk—Value at Risk(VaR).Besides,it made empirical study in foreign exchange risk of commercial banks based on improved VaR methods.Finally,it chose a method by veracity test,which was proper to measure the foreign rate risk of our commercial banks.The results showed that optimal measurement methods was GARCH(1,1)-M model based on t-distribution to estimate VaR.Then it put forward some corresponding policy recommendations based on the conclusions.Obviously, there is an important practical significance for Chinese commercial banks to raise foreign exchange risk management.