Risk Hedging Application of Quantitative Trading Risk Assessment Method in Securities Market

Abstract

This study focuses on the field of quantitative trading and explores in depth the application of risk assessment methods in securities market risk hedging. Through in-depth analysis of different risk categories in quantitative trading, the transmission mechanism and core influencing factors are clarified, such as market risk, credit risk, operational risk, liquidity risk, etc. Based on capital allocation theory, a dynamic risk parity strategy is created with the goal of balancing asset risk contributions, enhancing the robustness of quantitative strategies, and achieving sustained positive returns. Variables and data sources are selected from multiple perspectives in the securities market to construct a complex quantitative trading risk evaluation model. Through subsequent regression analysis, variance decomposition, time series stability check, and Montcallo simulation methods, the model settings are strictly checked to ensure accurate theoretical analysis. The final empirical results revealed that the new risk assessment method proposed specific suggestions for strategy optimization and adjustment through strategy backtesting and sensitivity analysis. In order to provide reference for efficient execution of risk hedging strategies in practice.