A Reasearch On Portfolio’s Risk Measurement Based On Copula Theory

Due to the lack of short tool Chinese stock market has long been one-way market, investors can only sell their stocks when the market is in a downward trend in time and loss can only growing. April16,2010the formal launch of the Shanghai and Shenzhen300stock index futures makes Chinese capital market turn into a two-way market. Stock index futures’high-risk and high-yield characteristics and role in the decision to hedge the stock index futures will become a necessary investment in investor’s portfolios varieties for both risk loving or risk averse.The first part of the article use cointegration test and ECM to verify Chinese CSI300Index, CSI300stock index futures with a long-term cointegration relationship, with two-way Granger causality between interval longer lag relations, empirical tests show that CSI300stock index futures with a certain degree of price discovery function, can become an effective tool for investors to avoid the stock market price risk.Next, build a portfolio of stock index futures, volatility of financial asset prices, linear correlation modeling method alone is not an accurate measure of the correlation structure between the assets. Copula model can be described not only as compared with the ordinary linear modeling method nonlinear asymmetric relationship between assets, and can also capture the correlation between changes in the structure in the asset. Therefore, the joint distribution modeling of the Copula function of the portfolio assets, and thus a more accurate measure of the portfolio VaR. Frist use GARCH model describing single asset yields, and then choose the Clayton Copula function to create a joint distribution model, use Monte Carlo simulation to generate the return series, and then calculate the portfolio VaR. Empirical evidence shows that, Copula method has higher accuracy in portfolio risk measure.