Research On Financial Market Risk Management And Its Optimization Algorithm

The risk of financial markets is everywhere, If these risks can not be solved probably, it will lead to much loss for financial institutions, this risk can easily be found anywhere in our daily life. Because of the financial market risk is manageable, investors can choose the appropriate risk management strategies and tools to avoid systemic risk. Investors can take advantage of diversification, hedge to transfer and manage risk in financial markets. The research content of this article is mainly use the diversification and hedging to manage financial market risk.First, investors use hedge to transfer risk in financial markets mainly use financial derivatives for hedging, to find the optimal hedging ratio. Based on this, This paper develop a futures hedging model based on the VaR under assumptions on the return rates of the spot commodities and the futures with elliptical distributions, analyze the first order conditions for the optimal hedging optimization problem to document the existence of the optimal hedging strategies, and use the augmented Lagrangian algorithm to solving the model.Second, use diversification to transfer the financial market risk via build the best financial portfolio, and the choice of each portfolio often involves the production of transaction costs. So the description of the transaction cost function and the measurement of the portfolio risk are the key points in the research of the investor. Based on this, This paper develop a portfolio model with typical transaction cost based on CVaR, and use the Particle swarm optimization algorithm to solving the model.