Quantitative Financial Risk Management by Desheng Dash Wu Editor

Quantitative Financial Risk Management by Desheng Dash Wu Editor

Part I
Market Risk Management

Empirical Analysis of Risk Measurement
of Chinese Mutual Funds
Ju Yang
Abstract Investment funds in China started in 1991. After 20 years of development,

the mutual fund industry is now offering a rich product line for investors. At
present, individual investors hold about 90% of the mutual fund with more than
90,000,000 fund accounts. Mutual fund purchasing has become the preferred way
of managing money for urban residents in China. This paper study on risk assessment

methods of investment fund. An empirical analysis of the selected 15 mutual
funds in China is performed with testing models of VaR, Semi-Parameter VaR and
GARCH-VaR. After testing of these models, these selected funds demonstrated
some of characteristics of China funds. As to risk assessment methods, we find that
Semi-Parameter VaR is relatively simple in calculation but the resulting confidence
interval is too wide for practical application. Comparatively GARCH-VaR is found
to be more rational and precise. GARCH-VaR method has better precision than
conventional performance index.
Keywords Mutual funds
Risk management
Semi-Parameter VaR model

GARCH-VaR
1 Introduction
Investment funds in China started in 1991, with the mark as promulgation and
implementation of in “Interim Measures for the Administration of Securities
Investment Funds” in October 1997. In March 1998 Guotai and Kaiyuan Securities
Investment Fund was set up, marking the beginning of securities investment fund
and its dominant direction in the industry in China. In 2001, Hua An Innovative
Investment Fund started the first open-end fund, marking another stage in China’s
fund industry development.

Quantitative Financial Risk Management by Desheng Dash Wu Editor