Research Into Exogenous Liquidity Risk Tools For Commodity Trading Of China

Triggered by a liquidity shortfall in the United States Financial system, financial crisis of2007has aroused concerns on liquidity risk. In recent years risk management has become an important issue. Among those risk metrics, Value at Risk is a widely used tool to predict possible losses at a specified confidence level. This paper focuses on the exogenous liquidity risk in the futures market in Dalian. Bangia et al. makes a distinction between exogenous and endogenous liquidity risk and proposes a simple method to integrate exogenous liquidity risk into the conventional VAR. In this paper, the basis of this model has made some adjustment.In the dissertation, mainly from two aspects, a single type of futures and portfolio. For a single future, I mainly study for empirical analysis. I make a conditional heteroskedasticite model to measure the Volatility of the daily yield, and then measure the correction factor of the market、the scale factor. At last I get the exogenous liquidity risk-adjusted VAR. Based on the empirical analysis, We can conclude that the Dalian futures market exist the exogenous liquidity risk, and it also constitute an important risk in the futures market, the investors should pay attention to this part of risk.The exogenous liquidity risk measure of the portfolio is achieved by a model running in Matlab. This model includes three main approaches, including back testing, conditional VAR, as well as innovative approaches to evaluate extreme events. In this model, the liquidity risk-adjusted VAR could be calculate in three ways, including the variance-covariance method, historical simulation and Monte Carlo method. Through the analysis of the empirical results, I give investors of the different risk preferences the advice how to make choice to the different portfolio.