The Risk Management Of Investment On Insurance Funds

At present, the insurance market is highly competitive, underwriting business as an important source of profit for the insurance company have the downward trend in recent years, in order to maintain the profitability of the company, the use of insurance funds as another source of profit for the insurance company is increasingly paid attention to by people. In recent years, the ever-widening channel for the use of insurance funds and the improvement of the investment climate bring a good opportunity for the vigorous development of China’s insurance market. However, benefits and risks exist side by side, we often enjoy the high profits of the stock market at the same time we need to bear the high risk. Therefore, insurance companies must strengthen risk control, according to their own risk preferences and the expectations of earnings, make appropriate investment strategy to improve risk management and profitability of insurance companies.The use of insurance funds face different risks in china’s different investment markets, and how to effectively measure the overall risk of the use of insurance funds has become an urgent in academia and industry.This article intends to construct a suitable econometric model to measure the risk of the use of insurance funds, in model building, first of all, we have created the GARCH model to reflect the volatility effect because there is volatility clustering in each market, for financial market data are often thick-tailed distribution, extreme value theory which measure the risk of losses caused by the fat tail distribution events and extreme events is introduced in the GARCH model to construct the GARCH-EVT model; secondly, in order to better measure the correlation between the different markets, we use copula function which can measure non-linear and asymmetric correlation to describe the different markets; finally, for the built GARCH-EVT-Copula model, we use the Monte Carlo method to simulate the rate of return data of different markets, and then calculate the VaR for each simulated data and the portfolio risk in the investment of insurance funds.In the empirical part, this paper select1041closing price data from January4,2007to May12,2011in trading day of SSE composite index, SSE fund index, SSE government bond index and overnight shibor to reflect the earnings in the several major investment markets of the investment of insurance funds. by establishing four risk control model of different combinations, we use the Monte Carlo method to simulate the data of rate of return in the four markets and then find the appropriate VaR and CVaR values, last, test the fitting results and optimize the portfolio.By the inspection act of Kupiec failure rate, we have come to a result that the fitting effect of the GARCH-EVT-Clayton is best, in the different degrees of confidence, the forecast failure rate and the expected failure rate is very close, there is a small error; from the results of optimization, the portfolio risk after optimization have a significant decrease than before, it explain that the model we build can effectively avoid risks.