The Application Of CAVG Model In The Exchange Rate Risk Measurement

With the rapid development of China's economy, especially after joining the WTO, the domestic market and international markets are becoming increasingly closer, international trade and the international capital flow in both directions, making the volume of China's unprecedented growth in foreign exchange business. At the same time, accelerating the pace of China's financial reform, the exchange rate trading band expand and exchange rate fluctuation become more frequent. The foreign exchange risk faced by investors is still increasing. Important issue facing investors is how to effectively measure and manage exchange rate riskRisk measurement is the most important part of risk management. At this stage,there are several measurement methods, sensitivity analysis, volatility analysis, value at risk and other measurement methods.Because of its simple, comprehensive, VaR has now become the mainstream method of measuring risk.First,referencing literature related to domestic and foreign scholars, this article illustrates the various types of risk measurement methods,and introduces the definition of exchange rate risk and its influencing factors;second,it introduces VaR, CVaR model and CAVG model which adding personal preferences into models, related to researches of the foreign scholars;Finally, it selects four main currencies data after the exchange reform to study their basic characteristics,which building different econometric models for different currencys, and calculates the exchange rate risk. The empirical results show that the risk measurement model CAVG which introducting personal preference can be more accurate and flexible to measure risk.