Empirical Analysis Of The Financial Risk Early Warning Based On The Arima Model

Along with economic globalization and the continuous deepening of liberalization, the diversification of international economic development becomes increasingly prominent, financial risk is the core of economic security and even national security strategy, its position becomes more prominent. The importance of prevention of financial risks has been more and more paid attention, especially in2008, the financial crisis sweeping the globe, which brought huge losses to the world economy. Therefore, we do much further research about financial risk early warning. At present, China’s financial system is not still completely, there are still some unreasonable aspects, such as inefficiencies of financial institutions, regulatory system is inadequate etc. At the same time, the external environment such as structure of foreign debt, foreign investment impact, etc. Their impact on our financial security is getting more and more obvious. Therefore, constructing of the financial risk early warning system, analyzing the influencing factors affecting the financial risks, studying and judging China’s financial security status, they play an important role in maintaining China’s financial security, guarding against financial risks and promoting table economic development.The article firstly starts from the theoretical background of the financial risk, elaborates on the causes of the financial risk, and discusses the financial risks generated from two aspects. Meanwhile, the article explains the types of financial risk from both micro and macro. Then, to determine the factors that affect our financial risks at home and abroad. The domestic affecting of financial risk factors includes unstable macroeconomic environment, financial market development, inadequate financial regulation imperfect, etc. Abroad affect our financial risk factors include the world uneven economic development, the impact of foreign banks and the impact of international capital flows.Secondly, the article discusses the most commonly used several evaluation methods, including AHP, factor analysis, fuzzy comprehensive evaluation method and artificial neural network. Analytic Hierarchy Process is empowered by experts, getting the contrast matrix, then, to the obtained contrast matrix mathematical processing, which can give a composite score. However, the subjectivity of the analytic hierarchy process is too strong, the results obtained may deviate from the actual results, moreover, when the indicators are excessive, applying Analytic Hierarchy Process will cause the data of statistics excessive and the weight is difficult to determine. The dependence of the factor analysis of the key indicators is too largely, researching on the selected index system is a test. Through summary the existing literature, it is found that there are many scholars using factor analysis to analyze the financial risk early warning problem, however, the representative of the public factor is not good which is using factor analysis method, therefore, the calculated factor score does not reflect the country’s overall financial risk profile. Thence, for the problems studied in this paper, it is not able to use factor analysis method. In practical applications, the BP neural network rely the sample. Fuzzy evaluation method deals with the fuzzy evaluation object through the precise digital means, for the fuzzy information, it can be able to make more scientific, reasonable, and close to the actual quantitative evaluation. That it gets the results of the evaluation is a vector, which contains rich information, which both can be more accurate to characterize the evaluated object, and can be further processed to obtain the reference information. In the study of the financial risk early warning, the divided of each risk level is of fuzzy and non-absolute, so it is difficult to make a precision judgment for the financial risk profile which is using the concept of whether. Therefore, it is more scientific and reasonable for the use of the fuzzy comprehensive evaluation to research the financial risks. Using Entropy Method to determine the weight, we can effectively avoid the subjectivity of empowerment, it is fully embodies the philosophy by numbers.Furthermore, this article details the principles of financial risk early warning indicators screening. Through studying, I determined five subsystems, including the macro risks subsystem, financial risks subsystem, the international balance of payment risks subsystem, banking inherent risks subsystems and securities risk subsystem, and it select19indicators to build a financial risk early warning indicator system. This paper describes a specific calculation steps which based on the law of entropy weight fuzzy comprehensive evaluation method. Then, it is detailed description of the process and the principle of the application of ARIMA modeling and forecasting.Finally, the paper made a comprehensive evaluation and analysis of the financial risk level from1996to2010which is based on the entropy method fuzzy comprehensive evaluation, and using ARIMA model to predict single indicator and evaluating the financial risk profile of the next three years. The paper analyze from six angles:macroeconomic risks subsystem, financial risks subsystem, the international balance of payment risks subsystem, securities risks subsystem and the entire financial system, and then identified our financial system’s weakness. It proposes countermeasures to enhance the financial security and guard against financial risks form the perspective of these six subsystems according to the empirical analysis’s results. Through analysis, it is found that China’s inflation is more prominent, and there is a rising trend in the next three years. The situation of China’s financial risk, the risk of international payments in the next few years is more serious, the high fiscal deficit ratio and the increased debt burden rate. The structure of foreign debt is extremely unreasonable, the proportion of short-term external debt is too large. In the next three years, the risk of the securities industry has increased year by year, the entire financial system risk profile over the next three years is staying in a vigilant state, but the situation is not optimistic...