Research On The Risk Measurement,contagion Path And Early Warning Within Main Financial Markets Of China

Financial security is the heart of national security.In the 13 th five-year plan,President Xi Jingping has proposed that it is necessary to establish a modern financial regulatory framework with overall coordination supervision,and stick to the bottom line of systemic risk prevention.Financial markets are a complex network with multiple layers and cross intersection.Individual or local financial risks can easily spread and evolve into systemic risk.With the acceleration of economic globalization and integration of financial markets,preventing risk contagion and strengthening risk early warning are essential for financial stability.From the perspective of practical supervision,China’s financial supervision lacks the cross-market perspective to assess and prevent risks.Moreover,existing researches mainly focus on cross-border or partial financial markets,while the research systematically concerning domestic cross-market risk contagion and early-warning is infrequent.Based on the macro-prudential supervision,this paper applies theories and methods of financial relevance theories,pressure index and nonlinear models so as to explore the risk measurement,risk contagion effects,and early warning mechanism among China’s major financial markets.The research works and innovation points are as follows:1.This thesis constructs risk indices with the bidirectional risk measuring the liquidity risk,stock volatility risk and exchange rate risk respectively.Moreover,we put forward a dynamic judgment method of high,medium and low degree of risk,which can recognize the bidirectional risk of appreciation and depreciation,surplus and shortage of currency liquidity,sharply rise and drop of the stock indices.According to the data of China’s financial markets,risk indices are more effective than the pressure index since their measure results are consistent of real events.2.This thesis proposes a multi-asset portfolio balance model to investigate the co-movement and risk contagion mechanism,and analyzes three risk transmission paths based on capital flows.First,a multi-asset portfolio balance model is proposed to improve the portfolio balance model from the perspective of holding assets and monetary demand.We analyze the co-movements of the interest rate,stock price and exchange rate under the change of three kinds supply.Secondly,combining with the Gordon model and Interest Rate Parity Formula,we explore inner mechanism of the risk contagion in financial markets under the attack of liquidity risk,stock volatility risk and exchange rate risk.In the following,we discover asymmetric co-movement effects by making research on the volatility spillovers of financial markets.Studies have shown that unusual capital flows contribute to risk contagion within financial networks.Subsequently,three basic risk transmission paths are identified with the routes of capital flows and co-movements among the main financial markets.3.The thesis proposes a risk contagion index based on the dynamic correlation of the main financial markets,so as to quantify the levels of cross-market risk contagion.We calculate the dynamic correlation by the DCC-MGARCH model.Afterwards,the Markov regime switching model is employed to classify the degree of risk contagion according to the characteristics of risk accumulation and contagion.We not only construct the risk contagion index of China’s financial markets,but also apply the contagion index into G20 countries for comparison.Research shows that the risk contagion index has broad applicability to reflect the increased systemic risk during turbulent periods within both advanced and emerging countries.No matter the global,regional or local financial events happened,the risk contagion index rises significantly.4.The thesis constructs the early warning indices of primary financial markets based on leading indicators.We use the time difference correlation analysis to select the leading indicator of each market with risk indice as benchmarks.According to the correlation coefficients,we composite the short-term and long-term early warning indice of each market.Based on the classical signal analysis,a validity test method including the accuracy rate,false alarm rate and missing report rate are proposed.The early warning index can not only warn the short-term and long-term risk status,but also distinguish the risk types and degree.5.In view of the current situation of China’s financial risk supervision,this paper puts forward feasible countermeasures of preventing systemic financial risks.This paper analyzes the existing problems from the aspects of financial coordinated supervision,cross-market data sharing and risk control measures,and gives concrete suggestions.