Research On Exchange Rate Risk Evaluation Of China's State-owned Commercial Banks Based On GARCH Model

In recent years,the frequency and scale of capital flow between countries has been increasing,so the various subjects of financial market pay more and more attention to the financial risks hidden by the process of economic globalization.Commercial banks play an important role in the financial industry and are subject to different risks from various areas in their daily business activities.As the internationalization of the banking sector gradually speeding up,banks themselves raised their concerns about exchange rate risk.However,China's foreign exchange business is relatively late,how to enhance the identification and management capacity for exchange rate risk is an important issue in front of our business organizations.Therefore,commercial banks must comprehensively exchange their exchange rate risk management capacity from all aspects,such as exchange rate risk identification,evaluation,control,and so on.State-owned commercial banks are the main components of China's banking system.Either their asset size or market share,or the number of personnel and outlets are in an absolute monopoly position.So they reflect the level of development of China's banking industry to a certain extent,and play decisive roles in the stable and healthy development of financial industry and even the whole national economy in our country.Therefore,it is of great theoretical and practical significance to study the exchange rate risk management of China's state-owned commercial banks.The main research methods used in this paper are theoretical analysis,empirical analysis and comparative analysis.The theoretical analysis method is adopted when discussing the definition and classification of exchange rate risk of commercial banks,introducing the exchange rate risk measurement method and management method;The Risk at Value(VaR)of a certain time node is calculated by taking the Bank of China as an example,meanwhile by using the GARCH model to analyze the fitting rate of return under the assumption of Student-t distribution and GED distribution,at this time,using empirical analysis;In comparison with the merits and demerits of the exchange rate risk analysis and evaluation methods adopted by China's state-owned commercial banks,and the selection of the yield distribution function of the measurement model,the comparative analysis method is adopted.On the basis of theoretical analysis,combination empirical analysis and comparative analysis,this paper starts from the problems existing in the exchange rate risk management of state-owned commercial banks,makes a systematic study on exchange rate risk measurement,and draws the following conclusions:In terms of exchange rate risk measurement,first,the exchange rate yield rate sequence does not obey the traditional normal distribution,but presents a more significant "peak and tail",smoothness,heteroskedasticity and fluctuating agglomeration;secondly,it is found that the GARCH(1,1)model under the Generalized Error Distribution(GED)can better fit the distribution of the yield series and the characteristics of the "spike and tail" and the heteroskedasticity of the financial time series,VaR results are more scientific and reasonable.Finally,this paper puts forward some suggestions on how to improve the exchange rate risk management ability of state-owned commercial banks in our country:First,learn from the advanced method of science and establish the effective exchange rate risk measurement system;Second,develop foreign exchange derivatives to enhance the use of various hedges tool capacity;Third,to improve the level of practitioners,to promote the development of the overall exchange rate risk management.