Portfolio Risk Utilising a Value at Risk Methodology Dissertation

Portfolio Risk Utilising a Value at Risk Methodology - Dissertation typemy gratitude and thanks to my supervisor Tony Hall and course leader Jason Law whose insight and experience showed me the right path and guidance to complete this project. My acknowledgment would not be complete if I miss to thank other tutors and classmates who were the source of learning and enjoyment throughout my stay at the university. Table of contentsTable of Contents6CHAPTER 18INTRODUCTION TO CHINA S STOCK MARKET81.1 intromission8CHAPTER II121.2 Stock Market evolution from 1922121.3 Institutional Facts about the Chinese Stock Industry121.3.1 Stock market structure 121.3.2 Share structure 131.3.3 Investors 141.3.4 Listing and de-listing141.3.5 Trading mechanism161.4 Value at Risk 171.4.1 Definition of Value at Risk181.5 existent progresses in Value at Risk Estimation211.5.1 Traditional Historical Simulation211.5.2 Variance-Covariance Approach231.5.3 GARCH Model Building Approach251.5.4 Monte Carlo Sim ulation25Chapter 328Value at Risk Methodology28 inlet281.2 Portfolio VAR311.3 Historical Simulation331.4 Monte Carlo Simulation341.5 VAR Strengths and Weaknesses35CHAPTER IV37DYNAMIC CORRELATOIN OF CHINESE STOCK374.1 Introduction374.2 Data and Descriptive Statistics 404.2.1 The Data404.2.2 Summary statistics414.3 The dynamic Correlation Coefficient Model454.4 Empirical Estimations48CHAPTER V51CONCLUSION51Effects of policy change51Conclusion53CHAPTER 1INTRODUCTION TO CHINA S STOCK MARKET1.1 IntroductionWith Chinas rapid transition to a modern economy, all of its agate line sectors and industries are undergoing dynamic changes. A substantial amount of working capital is required by business firms, and economic development in China demands rapid advancement of capital...With Chinas rapid transition to a modern economy, all of its business sectors and industries are undergoing dynamic changes. A substantial amount of working capital is required by business firms, and economic developm ent in China demands rapid advancement of capital markets. In retrospect, the first stock in China, Shen BaoAn, was issued in 1983. By then China had no securities exchange, and stock handicraft activities were operated virtually resistance (Chen and Sun, 2003). It was three years later, on September 26, 1986, that the JinAn Business of CICB Shanghai Trust and Invest Company began to trade its stocks over the counter. Nevertheless, the local secondary market trading was still unofficial and unorganized (Gordon and Li, 1991). After several years effort and a learning period, the Shanghai Stock Exchange and Shenshen Stock Exchange were formally established on December 19, and December 1, 1990, respectively.Since their establishment in the early 1990s, developing Chinese stock markets have received a great visual modality of attention from both domestic and international practitioners and researchers. The main reason for this is that, before 1982, the Chinese economy was a central pl anning system in which no private business was allowed, and there was no market-oriented banking system. The constitution Act in 1982 lifted the ban on private business activities (Shirai, 2002), allowing a large bite of state-owned enterprises (SOEs) and banks to be privatized and incorporated.