Research On Nanjing Bank’s Asset Allocation Based On VAR Model

In recent years,China’s commercial Banks have gradually moved to the world financial market,facing more complicated business environment and increasingly fierce competition.How to make the commercial Banks to reduce the risk and raise the profit as far as possible without the conflict with the supervision condition becomes the subject of concern.It is of great significance to study how commercial Banks can effectively allocate assets under the condition of ensuring normal profits,and to prevent commercial bank risks in a timely manner and improve profitability.In this paper,the maximum income of the assets allocation of Nanjing Bank is set as the objective function,and the debt and equity costs in the income are excluded,which is to seek the maximization of economic interests.In the asset allocation,various regulatory constraints and VaR constraints are added,and the asset allocation model of nanjing bank based on VaR is constructed.In the model,VaR measures mainly credit risk.The model measures the Va R value of the loan through the CreditMetrics method.Different from the past,this paper calculates the correlation coefficient through the historical data of loan yield,instead of using the correlation coefficient of corporate assets to solve,that is,the method that CreditMetrics usually measures risk based on asset changes has been improved to make the calculated VaR value more accurate and reasonable.In the construction of the function,instead of maximizing the traditional accounting profit as the objective function,but considering the cost of capital occupation,the equity cost and debt cost are removed from the model,and the real gains of the commercial bank are obtained.This article removes the two constraints of loan-to-deposit ratio and reserve ratio according to policy changes,and relaxes the scope of application of the model.In the selection of variables,the proportion of commercial bank securities investment is added as a variable to the model,because the assets of Nanjing Bank are mainly composed of two parts: loans and securities investment assets.In Nanjing Bank,the income of other assets besides loans can basically be determined and can be approximated as risk-free assets.Therefore,the bank should pay attention to most is the loan risk.The following analysis will introduce the risk measurement.The tool VaR uses the CreditMetrics method to measure the VaR value of a loan,and strives to maximize bank returns while satisfying various constraints.The specific distribution ratio of each asset is given at the same time when the maximum return is obtained.Then the distribution ratio of each asset is analyzed,and the asset allocation behavior of Nanjing Bank is studied through the result of asset allocation.At the end of the article,the policy recommendations of related parties are given to help the Bank of Nanjing to effectively prevent risks and optimize asset allocation through the study of this paper.