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The Early Warning System for the Stock Positions of Securities Firms---Based on VaR

In recent year, the securities firms had suffered form the turmoil of the financial crisis in Taiwan. Although the Taiwan Stock Exchange Corporation and the Securities and Futures Commission have their own early warning systems (EWS), the EWS based on financial statements and the "capital adequacy ratio", respectively for the risks that the brokers and dealers assume, still have some defects: (1) EWS based on financial statements are static and time-lagged in the rapid-moving market, and (2) the calculation rules in the capital adequacy ratio are inelastic and inefficient.
This research emphasizes on the stock positions of the dealers, and calculate the "Value at Risk" (VaR) for these positions. In this way, we hope to know whether the EWS based on VaR can detect the risks of the dealers in time, and improve the drawbacks of the EWS based on financial statements and capital adequacy ratio.
We found that: (1) the EWS based on VaR can effectively reflect the market risk of the dealers, and (2) the "historical simulation" method might distort the real portfolio risk, thus we suggest that "delta-normal" is a better method, and (3) the EWS based on VaR can discriminate the risk level of different securities dealers.
In conclusion, we have the suggestion of the EWS for securities firms in the future. For firm-wide operation, the EWS based on financial statements is suitable; for the credit risks the securities firms may assume, the capital adequacy ratio is better; as for the market risk of the positions, VaR, undoubtedly, is a good alternative.

Identiferoai:union.ndltd.org:NSYSU/oai:NSYSU:etd-0614100-231455
Date14 June 2000
CreatorsHuang, Kuan-Hua
ContributorsJay-Cheng Lu, Jen-Jsung Huang, Yo-Heng Lo
PublisherNSYSU
Source SetsNSYSU Electronic Thesis and Dissertation Archive
LanguageCholon
Detected LanguageEnglish
Typetext
Formatapplication/pdf
Sourcehttp://etd.lib.nsysu.edu.tw/ETD-db/ETD-search/view_etd?URN=etd-0614100-231455
Rightsunrestricted, Copyright information available at source archive

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