Commercial Bank Risk Based On The Theory Of The Copulas Connect Integration Measure Research

With collectivized and international development in financial industry and the widely use of information technology, the risk features of commercial banks convert from simplification to diversification and complication, which puts forward to commercial banks’risk integral measurement. In2004, the New Basel Capital Accord presents that commercial banks mainly faced credit risks, market risks and operational risks, risk integral measurement mainly focus on these three types of risk. Researches show that there is a correlation, especially a nonlinear correlation among risks, and the relation is time-varying with the financial market volatility, it’s a dynamic process. So, it has important academic and practical value to measure integral risks with considering nonlinear and time-varying correlation among credit risk, market risk and operational risk under risk diversification and complication situation.In this paper, we firstly comb and review the literatures about credit risk measurement, market risk measurement, operational risk measurement and the integral measurement of these three types of risks, and define the important concepts and scope in the paper, such as credit risk, market risk, and operational risk. Secondly, we put forward to a copula method to describe the correlation structure, improve the goodness of fit test of copula, and introduce the risk measurement instruments, such as Value-at-Risk (VaR) and Conditional Value-at-Risk (CVaR), combined KMV model with beta distribution, GARCH model with empirical distribution, and Fama-French model with two-stage distribution, respectively, we measure credit risk, market risk, and operational risk. Using static Copula and dynamic Copula to describe correlation among three types of risks, we construct a risk integral measurement framework. In the framework, we do an empirical comparative study with12commercial banks listed on Shanghai Stock Exchange (SSE), and analyze the risk diversification effect on different correlation structure. Finally, we try to give some useful suggestions on how to develop comprehensive risk integral measurement technology to commercial bank. This study provides theory evidence, model reference and empirical contributions to comprehensive risk management.