Covar And Extreme Value Theory In The Construction Of Portfolio

With China's rapid economic development and people's strengthening awareness of risk management, insurance industry's position in the national economy is increasing.As a special asset management company, insurance companies have two main aspects of business:the underwriting business,and investment business.In these two types of business,combined with the development trajectory of the foreign insurance industry,we can find that the profitability of underwriting business is declining gradually over time, and even negative.Therefore,the profitability of investment business becomes essential,which determines the insurance company's continuing operations and the healthy development of the entire insurance industry.In the content of increased volatility in the stock market, and gradually increased proportion of insurance funds into the market,we introduce extreme value theory into calculation of VaR of the daily yield of Shanghai stock index and single stock.and get CoVaR via VaR, and propose a new index-index of risk compensation (RCI).Finally, on the basis of RCI.We make an empirical research on the stock portfolio published in China Life Insurance2010Annual Report in the combination of risk compensation index.the Sharpe Ratio and Te Leinuo Index.The results show that risk-free government bonds has an important role in the portfolio,and it is of great significance in the construction of stock portfolio by comprehensive use of risk compensation index and the Sharpe Ratio. Te Leinuo index.After arriving at these conclusions,in order to test the effectiveness of RCI in the construction of stock portfolio.we extend the time interval of every stock in the initial portfolio,and then make the appropriate statistical analysis.Statistical analysis shows that it has a certain rationality of applying RCI in the construction of stock portfolio.