VaR Interest Rate Risk Research And Its Emprical Study

GARCH-class models based VaR approach has been applied to the risk research of many financial and bank institutions,which attracted more and more attention in recent years.This article was established in the metrics of interest rate risk.The current situation of interest risk management to the commercial bank,the concept and reason of interest risk was described in detail first.Then we compared its principle,range of application and superiority-inferiority according to five interest rate risk measuring methods.Parameter,nonparameter and semi-parameter computing method,merit-demerit and accuracy test approach of VaR was concluded on the basis of its mathematic definition and estimation method.Eight classic equation of GARCH class were gained.We also made sure the basic hypothesis and standard model of normal distribution,t distribution and GED distribution.We analyzed the historical data of inter-bank lending rates which was extracted between the banks in Shanghai by Eviews 8 and Matlab 7.11.0.Mean equation,variance equation and auxiliary equation which under different distribution hypothesizes and GARCH models were established contraposed the inter-bank lending rates after the stationary test,correlation test,normality test and heteroscedasticity test.They could be used to describe overnight interest rate fluctuations and verified that residual term subject to t distribution and GED distribution was reasonable.The calculation results showed that GARCH/GARCH-M/EGARCH was the best model under t-distribution.Different VaR evaluation methods were used to estimate the interest rate risk after calculating the VaR at the confidence level of 90%,95%,99%.Through the comparison for different models and different confidence levels by Kupiec failure rate test,results showed that the risk estimation of GARCH/GARCH-M/EGARCH models under t distribution was more stable than others.The empirical research in this paper could offer some reference to the research of VaR interest rate risk and internet finance.It can also offer some reasonable suggestions toward the development of risk-based regulation system on interest rates liberalization.