The Research on Improvement and Application of VaR Model Based on Historical Simulation Method

VaR method is the mainstream technology to measure market risk in the current international financial field. As one of the basic VaR methodologies, Historical Simulation Method (HS) is effective and widely accepted and adopted by many international financial institutions and governments. However, there are still many aspects to improve it. This paper brings forward a modified VaR model based on historical simulation method. This method is applied to the empirical analysis and backing test on China´s Shanghai Securities Index, and it is also compared with the traditional method of historical simulation. The empirical results showed that the modified VaR model which is based on historical simulation has more advantages. In order to speed up the application of modified VAR model in China, we put forward some suggestions in the last part of paper.