A Calculation of VaR Based on GARCH Model

This paper reviews the meaning and calculating methods of VaR and puts forward GARCH model to improve the estimation of VaR. GARCH model overcomes the defects of volatility without considering market factors in conventional analysis methods of VaR. We demonstrate that VaR based on GARCH model has good dynamics and accuracy. Finally, through the analysis of the actual data of Shanghai Securities Exchange and the test of likelihood ratio, we conclude that GARCH model precisely reflects the volatility of market factors and VaR based on GARCH properly reflects the risk level of finance market