Research On The Contagion And Control Of Bank Systemic Risk Based On Dynamic Multi-layer Network

The financial system is a complex system composed of many subsystems.Different financial subjects form complex financial relationships through different financial markets.The high interconnection among financial institutions improves the efficiency of the financial system,but at the same time provides a channel for financial risk contagion,reduces the stability of the financial system and increases the probability of systemic risk.Previous financial crises have shown that the inter-bank market plays an important role in risk contagion.In China’s financial system,due to the leading role of the banking sector in indirect financing,most of the risks in China’s financial system are concentrated in the banking system.The report of the 19 th National Congress of the Communist Party of China and the central economic work conference put forward the requirement of "keeping the bottom line of avoiding systemic financial risks,and better combining prevention and resolution of financial risks with serving the real economy",and put forward the two pillar policy framework of "Monetary policy+ Macro-prudential policy".In recent years,China has gradually liberalized the derivatives market.The high risk of the derivatives market makes it play an important role in preventing the occurrence of the banking systemic risk.Ignoring the derivatives market will seriously underestimate the banking systemic risk.Therefore,I study the contagion mechanism and prevention strategy of the banking systemic risk from the perspective of multi-layer financial correlation in the banking system,aiming to comprehensively and accurately analyze the contagion mechanism of risk in different contagion channels and financial markets and prevent the occurrence of the banking systemic risk more effectively.First,a dynamic multi-layer network model of banks is constructed by introducing derivatives trading correlation and common asset holdings correlation,which includes the inter-bank lending network,the derivatives transaction network and the common asset holdings network.At the same time,the direct risk contagion channels related to the inter-bank lending and the derivatives trading and the indirect risk contagion channels related to common asset holdings are considered.The characteristics of bank balance sheet and bank transaction network structure during the evolution process of the model are analyzed based on the bank dynamic multi-layer network model.The results show that the distribution of bank total assets,net assets,inter-bank assets,inter-bank liabilities,derivative assets and derivative liabilities approximately shows power-law distribution characteristics in the tail,which is similar to the distribution of the above items in the bank balance sheet of real banks in China.Both the inter-bank lending network and the derivative trading network present the core-periphery network structure at different evolution times,and with the increase of evolution time,the characteristics of the core-periphery network structure features become more and more significant.Second,based on the dynamic multi-layer network model of banks,combined with the the Debt Rank model,a bank systemic risk measurement model is constructed,which includes three risk contagion channels with two direct correlations of inter-bank lending and derivative trading and one indirect correlation of common asset holdings.The results show that the inter-bank lending risk is the highest,followed by the risk of common asset holdings,and the risk of derivatives is the lowest.The combined effect of multiple risk transmission channels will have a nonlinear amplification effect on the banking systemic risk,and the banking systemic risk has the characteristics of power-law distribution.Third,based on the bank dynamic multi-layer network model,the impacts of multi-layer network centrality and bank subject behavior on bank systemic risk contagion is studied.The results of econometric analysis show that the four multi-layer network centrality and asset size are positively correlated with bank contagion effect and bank systemic risk.Bank concentration,leverage ratio and asset liability ratio are positively correlated with bank contagion effect and bank systemic risk.There is a negative correlation between bank net assets,bank contagion effect and bank systemic risk.Compared with the three risk measurement methods of ΔCo Va R(Conditional on the difference in value at risk),MES(Marginal Expected Loss)and SRISK(Systematic Risk Index),the banking systemic risk measured by the multi-layer network Debt Rank model can capture the structural characteristics of the bank network.The simulation results of bank subject behavior characteristics and bank systemic risk contagion show that the increase of the degree of bank profit seeking and the decrease of risk preference reduce the banking systemic risk,and the improvement of bank environmental adaptability promotes the development of banking industry and different financial markets,and reduces the banking systemic risk.Finally,based on the nonlinear optimization model of bank systemic risk and the dynamic multi-layer network model of bank,I study the systemic risk control strategy of banks from the perspectives of portfolio,macro-prudential policy,monetary policy and derivatives market.Firstly,based on the risk measurement idea of the Debt Rank model and the Mean-Variance portfolio theory,a nonlinear bank risk optimization model is constructed.The simulation results of the systematic risk optimization model show that the density of the derivatives trading network and the common asset holdings network increases significantly after optimization,different types of transactions among different banks are more closely related.The overall volatility of the HHIs of banks and securities is low,and the HHIs also after optimization decrease significantly.The simulation results of macro-prudential policy,monetary policy and the combination of the two on the prevention and control strategy of the banking systemic risk show that the implementation of market constraint mechanism helps to promote the development of the banking system and reduce the banking systemic risk.Liquidity regulation and leverage regulation restrain the development of the banking system to a certain extent,but also reduce the risk level of the banking system.The combination of macro-prudential policy and monetary policy reduces the impact of monetary policy on the banking system.A certain degree volatility of bond interest rate is conducive to the stable development of the banking system,but the excessive volatility of bond interest rate will reduce the stability of the banking system.The decrease of market liquidity and the increase of central lending rate are not conducive to the development of the banking system,but also increase the risk of the banking system.The simulation results of the derivatives market and the banking systemic risk prevention and control show that both the margin system and the central clearing mechanism reduce the risk exposure of the derivatives market and the amount of additional margin,thereby reducing the banking systemic risk.Compared with the margin system,the central clearing mechanism is more efficient in reducing the banking systemic risk.Based on the characteristics of the complex financial correlation among banks,i bring the derivatives market into the research of systematic risk of banks,and constructs a dynamic multi-layer network model of banks,involving five financial markets : bonds,securities,inter-bank lending,derivatives and other investments,which makes up for the defects of the existing single-layer banking network model.At the same time,a comprehensive study on the banking systemic risk contagion mechanism and prevention and control strategies from the micro and macro perspectives is carried out,which helps to understand the banking systemic risk contagion mechanism more clearly.At the same time,it also provides policy suggestions for preventing the banking systemic risk and maintaining the stability of the financial system.