TITLE:
The Researches on Exchange Rate Risk of Chinese Commercial Banks Based on Copula-Garch Model
AUTHORS:
Baoqian Wang, Tingting Cao, Shu Wang
KEYWORDS:
Exchange Rate Risk, Copula Function, VaR
JOURNAL NAME:
Modern Economy,
Vol.5 No.5,
May
23,
2014
ABSTRACT:
After the
exchange rate reforms in 2005, China has transformed the fixed exchange rate
system into a floating exchange rate system dominated by market supply and
demand. Commercial banks will face with greater exchange rate risk. Therefore,
how to estimate exchange rate risk and keep the optimal portfolio of foreign
exchange is an important research subject. This article chooses the date of the
RMB exchange rate against the dollar and the yen from the January 1, 2008 to
May 21, 2012 as samples, describes the joint distribution of the two assets using
Copula-Garch model, thus eventually works out the optimal holding ratio of the
two foreign currency assets under minimal risk situations.