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Value-at-Risk Modelling for Risk Management of RMB Exchange Rate

Li Zhou, Ning Zhang, Qing-yi Chen

Abstract


VaR (Value-at-Risk) model is currently the most popular tools of risk measurement, and has developed into the standard technique of risk management in banks and other financial institutions. The main idea of VaR methods is to compare the losses of potential risks with the current assets and evaluate the central bank's payment capacity. In this paper, we first modeling a VaR model for central bank to measure the RMB exchange rate risk, then we test the exchange rate risk measurement method and find out GARCH-t model is the optimal method to measure RMB exchange rate risk.

Keywords


Value-at-Risk Model, Parametric Methods, Kupiec test, RMB Exchange Rate.

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