Applications Of VaR Method In Shanghai&Shenzhen Stock Market Risk Measurement

China’s stock market has experienced20years of development, and achieved great success, the market is expanding, innovative trading products, while the risks are increasingly diverse, complex."Stock market risk, market to be cautious," and this household name, then not only reminded every stock market participants have to face market risk, but also tells us that the right measure and should take risks, investors need to focus on is the focus, but also financial institutions and regulatory authorities to establish a risk management system core. Around the focus of risk management, stock market, have raised many risk measurement techniques and methods, such as δ values can be used as a single measurement of overall risk stocks, CAMP model to determine the (3value of the stock system, the size of the risk, sensitivity analysis method can reveal how the stock portfolio value by market factors change, etc. Currently, the most mainstream of the risk measurement methods by G30, JPMorgan’s VaR methodology, it is higher than the previous method can be more scientific, accurate, practical and integrated measure of risk, and with the scenario analysis, back testing and stress testing methods such as integrated into a complete series of the VaR risk management system, is widely used in market risk measurement and management, quick access in the short term, including BIS, Basel Commission and other official institutions and banks, insurance, securities and other financial institutions of all ages, has been developed for the internationally accepted financial risk management of the new standards.By the VaR methodology to study and analyze the stock market risk to achieve their goal of effective risk management is of great theoretical and practical significance. Studies abroad in this regard have been more mature and complete, computational methods are also emerging, as compared to domestic research is relatively backward. In recent years, as China’s stock market,’the size of non-’ban the circulation brought about the rapid increase in stock value, and margin trading, short selling and other trading mechanism of the formation of market fluctuations have become more frequent, increasing the risk of the stock market, and therefore, established in accordance with standard international practice, the VaR risk management system will become inevitable, while the VaR for further in-depth research to grasp the precise risk measurement technology is the key.This paper is both theoretical and empirical methods to elaborate on the contents of VaR and its application in China’s stock market. First, the theory focuses on the VaR of the background, meaning, domestic and foreign-related research, describes the basic meaning of VaR, and the main features of the calculation, and proper comparison of various methods of analysis. Second, the empirical side of the VaR method in China’s stock market risk management applications, mainly in Shanghai and Shenzhen300Index for the study of its return series were established on different ARCH models and GARCH models, based on the established model VaR is calculated on the value and compare the results of different models estimated the pros and cons. The results show that in the normal market, the most effective estimation of Shanghai&Shenzhen stock market value at risk (VaR) is based on the GARCH (1,1) model, through the use of VaR back testing method has been found that the biggest single-day loss of value may be compared with the traditional10%stock price limits the maximum possible loss under value is smaller, that is, to a more accurate measure of stock market risk. So as to set the size of venture capital to provide a reasonable basis, so that not only can effectively avoid market risks, but also to prevent the waste of capital and improve capital efficiency, which reflects the core values of research papers.