Research On Financial Risk Problem Of Taiwan Area

In the late 1990s, the emerging market countries have experienced serious financial crisises one after another. Among them, in the Taiwan area, the macro economy vulnerability has been extremely obvious. This dissertation analyzes risk condition of each sector in Taiwan during latest ten years from the macro financial engineering angle, mainly utilizing the balance sheet analysis approach (BSA) and the contingent claim balance sheet analysis approach (CCA). Through the analysis, it shows that the empirical analysis result coincides with the economical condition of Taiwan area during latest ten years. Finally, in view of the empirical result, this dissertation proposes corresponding policy recommendations on how to guard against the crisis.The outline of this article is as follows:Chapter 1 is about the literature summary of the macro financial risk, the BSA and CCA. We mainly present the BSA and CCA, the study on the financial stability, the application of the BSA and the CCA to the research of the financial risk and financial stability. Finally we summarize the research of the Taiwan financial risk and its precaution.Chapter 2 is about the analysis of the balance sheet analysis of various sector in Taiwan. Firstly we establish and analyze the balance sheets of the Taiwan’s enterprise sector, the finance sector, the family sector and the government sector. Then we analyze the interrelations among the different sectors’ balance sheets, the influence of the financial liberalization on these four sectors and the macro financial risk in Taiwan area. Namely on the basis of the balance sheet, we explore the term mismatch, the currency mismatch, the capital structure and solvency matter, moreover we study on how the financial risk transmits among different sectors.Chapter 3 is about the analysis of the contingent claim balance sheets of the four sectors in Taiwan. In this section, we apply the CCA into analyzing the financial risk of the four sectors and the entire Taiwan area, further into exploring the risk transmission mechanisms among the various sectors.Specifically, we set up the contingent claim balance sheets of the four sectors using the market price of the asset and claim. Based on the volatility of each sector’s and the whole Taiwan’s asset prices, we construct the financial risk index, e.g. the risk neutral default probability, credit spread and so on.Chapter 4 is about the pressure test and the sensitivity analysis on the contingent claim balance sheets of various sectors and the entire Taiwan area. We analyze how the interest rate, exchange rate and the capital flow influence each sector’s and the whole Taiwan’s assets, and quantitatively measure the adjustment of the position in the contingent claim balance sheets.Chapter 5 is about the risk transmission mechanism and its influence on the macro financial risk and financial stability. Based on the BSA and CCA, we study the risk transmission mechanism, the macro financial risk and the financial stability.Chapter 6 is about the construction of the financial security index and the early warning mechanism.When constructing the financial security index, this dissertation will consider both qualitative and quantitative indicators. On the basis of the financial security index, we finally set up the early warning mechanism in the Taiwan area.Chapter 7 is the conclusion and expectation of the research.