An Empirical Study Of China’s Financial Risk Early Warning Based On VaR Method

The financial sector in the country’s economic system at the core of the financialindustry gathered most of the risks in the economic operation. For financial risk control,left unchecked, their accumulation to a certain level it will evolve into a financial crisis. Inrecent decades, the frequent outbreaks of the world financial crisis, the outbreak of thecountry to the crisis and even the global economy have brought a heavy blow, it is alsodeeply appreciate the dangers of the financial crisis.This article first briefly review the history of the development of the theory offinancial risk early warning, domestic and foreign research results a brief summary.Secondly, the financial risks, financial crisis and the financial early warning relatedconcepts were defined, and financial fragility as a starting point to establish the rationalityof the financial risk early warning system, the theoretical explanation and existingdomestic and foreign financial risk early warning modeldiscussion and comment. Selectearly warning indicators, selected on behalf of the12indicators of China’s macro-financialrisks,15net financial indicators simply represent the financial markets and selectedaccording to the characteristics of China’s financial markets. In the empirical part, we havechosen the VaR methodology to build the financial risk early warning signal system, inorder to display China’s financial risk profile, select the GARCH model to the calculationof VaR. Finally, according to the conclusions reached by the empirical establishment of thefinancial risk early warning system a few suggestions.Review of the worldwide financial crisis, almost all of sudden, this feature makes thecrisis, the country can not be timely to take preventive measures, and ultimately led to thecrisis expansion. Financial risk early warning of risk prediction, control, and thus thepossibility of a crisis will occur to a minimum. Thus, financial risk early warning for theprotection of national economic stability and healthy development of great significance.