China's Investment Banking Market Risk Management

With the emergence of the securitization of international financing and wave thedevelopment of the economic globalization, the international capital market haverapid development in the past few decades, investment Banks as a capital market ofthe force at the core, has played a huge role. In the open economic conditions, the in-vestment Banks are not may stay, the stock market will be the internationalization ofthe securities market in China is an important trend, plus the domestic market reform,marketization will also be one of the important characteristics of the investmentbanking industry, therefore, China investment Banks face the shock of both domesticand international market, the importance of market risk management is self-evident.The subprime crisis have a far-reaching influence to the development of the interna-tional investment banking, research of the transmission mechanism undoubtedly havevery important practical significance to Chinese investment banking market riskmanagement.This paper first introduced the investment bank market risk types, sources andmeasure, and introduces one risk management tools-VaR model, that we often use.And then expounds the development situation of investment banking industry inChina and its risk management practice. Then introduced kinds of derivatives in thesubprime crisis and innovation chain, discusses the causes of subprime crisis and itsimpact to investment bank at home and abroad, and then analyzes the transmissionmechanism of the subprime crisis in credit market, capital market, domestic and in-ternational market, and take a case analysis between Bear Stearns and Citic Securitiesfrom the basic conditions, main business income structure,risk management and pro-gram. Based on above analysis, in view of the present situation of the development ofinvestment banking industry in China, put forward five measures as follows: promotemarket segments; set divery business structure; perfect the organization structure sys-tem,further raise the ability of controlling risk; promote financial innovation safely; take international expansion prudently.In recent years, China investment bank have rapid development, but still a gapcompared to those developed countries because of the late start, the development timeis short, and ability of risk management also relatively weak, all kinds of risk man-agement techniques and measures have to be improved. So we should actively learnsuccessful risk management experience from foreign investment banking, and avoidits failure, gradually establish a suitable risk management system for China’s specificconditions, constantly improve the risk management ability, so as to ensure that theinvestment banking industry have steady development. With the financial globaliza-tion propulsion, domestic and foreign investment banking constantly competition andfusion, investment banking industry in China will face more complex market riskmanagement problems, we hope that the analysis and research of this paper has expe-rience and the instruction significance to our country investment banking market riskmanagement.