The Evaluation Model Of The Contagion Risk Between Chinese Commercial Banks And Property Sectors

The contagion risk of financial crisis has been the hot spot in the area of finance engineering.Based on Extreme Value Theory,this paper established the evaluation model of the contagion risk of financial crisis, taking Chinese commercial banks and property sectors as research objects to estimate the probability of contagion risk between them,not only has studied whether the inner systemic risk of banking sector and Chinese real estate market obviously increased with the occurring of the global crisis but also tried to find whether the contagion risk existed between the two sectors as well as to estimate its probability.This paper established univariate downside extreme risk model and joint contagion risk model based on the previous research to measure univariate downside extreme risk (i.e. One-dimensional extreme risk) and multivariate intra-sector and inter-sector contagion risks (i.e. planar extreme risk) in Chinese commercial banks and property sectors during the recent global crisis triggered by the American subprime mortgage crisis.This paper finds that both of the two sectors exhibit higher level univariate downside extreme risk and the bank sector’s is relatively higher than the property sector’s. In addition, the crisis not only significantly increased the probability of a bank or property firm crashing, but also increased the probability of multivariate intra-sector and inter-sector contagion risks.The further result of this paper also shows that the Conditional-co-crash probability of Chinese commercial banking sector and property sector is significantly higher than it of the others with banking sector.The findings thus providing strong empirical evidence for the relative importance that the property sector carries for the stability of the banking sector. The study of this paper has provided feasible and good measure to discuss the issues on how to forecast and measure the contagion of the financial crisis of Chinese economic sectors in the future when the crisis occurs.