The Research Of VaR Model Based On GARCH And CKLS Model

Along with the development of interest market, the management of interest rate risk is becoming more and more important. And as we all know, Shibor is the highest traded of marked-oriented rate in China, and the volatility of Shibor is more and more severe. The banks in China have already realized the importance of control interest rate risk and finding a more effective way to control interest rate risk is very meaningful. The Basel Committee has recommended VaR Model as a tool to manage risk and provide regulatory capital. Right now most banks in china are still using interest rate sensitive management to manage risk and obviously this is in appropriate and uncultured. This paper establishes VaR Model based on GARCH and CKLS Model, analysis and compare the two models'difference. The conclusions are as followed:GARCH Model's VaR is much less than CKLS Models'VaR and therefore is more sensitive to interest rate volatility. Combined with Kupiec text'result, we think that CKLS Model is more suitable for managing risk rise and GARCH Model is more suitable of managing risk drop.