Rebar Trade Market Risk Management Studies

Basel Committee introduced Core Principles for Effective Banking Supervision in1997and made market risk, credit risk and operational risk together as the focus of bank regulators. In recent decades, the exchange rate, interest rate and commodity price fluctuations have showed the features of global synchronization. With more frequent and severe of the fluctuations, destructive of all types of market risks will be intensified and this makes various economic agents must have stronger assessment of the ability to control market risk. Research of market risk measurement and management is limited to commercial banks and other financial institutions and there are very few studies on other types of enterprise. The main research directions of this paper is to design a suitable market risk management for the needs of development of rebar trade enterprises according to both the operational characteristics of their own and the business environment with the experience of risk measurement and risk limit management of advanced foreign banks.The VaR methodology is one of the classical methods of financial market risk measurement and this is the first time to use the VaR in the measurement of market risk of trade business. This paper studies the market risk management of rebar trading business from four aspects:risk identification, risk assessment, risk appraisal and risk response.First, from the rebar business processes, we find that procurement, inventory and marketing maybe the points which are faced with the market risk. In this way, we can identify the main market risk of trade enterprises is the profit and loss caused by the changes of rebar price. Then we quantify the market risk of rebar trade business with risk exposure, MtM and VaR. The paper use rebar spread system and@risk software in the VaR measurement methods, in order to simplify and optimize the calculation of VaR. Last, compared with the pre-set limit, we display the status of risk management with warning colors, which include red, yellow and green, and bring forward four ways to solve over-represented events: risk-averse, risk-reduction, risk-sharing, and risk-accepted.