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In recent years, financial disasters have emphasized the importance of effective risk management for financial regulators and market practitioners who have become particularly sensitive to changes in the assets value. The use of quantitative risk measures has become an essential management tool to be placed in parallel with the models of returns. In this paper, we introduce all kinds of GARCH models and EVT theory and apply those method to measure exchange rate risk of Chinese exchange market. Firstly, we examine the the heteroscedasticity of the return series of USD/RMB and EUR/RMB data, the results suggest that there is obvious heteroscedasticity. Secondly, we choose the best GARCH model to filter the return series to i.i.d residual series and employ extreme value theory to estimate the tails of those i.i.d series, we find the degree of fitting of GPD is very high. Finally, we calculate corresponding VaR estimates, which can help investor to measure exchange risk accurately. Keywords—VaR; GARCH; EVT; Exchange rate; Market Risk Measurement

VaR Model Measure Exchange Rate Risk Based on GARCH Approach and EVT Theory