Research On The Shock Of Volatility In Money Market To Yields Of Internet Money Market Fund

The Internet Finance is the combination of traditional finance and the spirit of internet technology. It has shown the typical feature of strong creativity. China’s Internet Finance will have huge impacts on China’s traditional financial activities and the integration of the whole financial industry. The reform of the current financial supervision framework is needed. While obtaining wide supports, the Internet Money Market Fund has suffered a lot of criticism. How are the high yields obtained, whether they are sustainable and how are the trends of them in the future, all of these questions get public attention.On the condition that the current Internet financial innovation occurs continually, real-time monitoring and early warning to the volatility of yields of Internet MMF are urgently needed to put them under control. Then the scale of this MMF is limited. The prudential regulation can be developed to resist the liquidity risk. As a new member of the shadow banking system in China, the scale of Internet MMF is highly related to its yields. Therefore, we need to undertake further analysis of the relationship among the volatility of yields of internet MMF, interest spreads and money market rates.This paper combines theoretical and empirical analysis to study the influence of the volatility of money market rates on the volatility of Internet MMF yields. Firstly, the research elaborates on the relationship between Internet MMF and money market. After analyzing the definition and types of investments of internet MMF, We study its new role in the E-Commerce platform and its impact on the liquidity in money market. Secondly, we construct the MGARCH-BEKK model to study the relationship between money market rates and the internet MMF yields, testing the spillover effect of the rates on the internet MMF yields. Thirdly, this paper study the trend of this shock. The first part constructs the yield pressure indicators, then the logit models are created and the early warning risk signal simulation curve is obtained to see the strength and the trend of these shocks. Also the shocks that interbank bond indexes have on the yields of internet MMF are studied.According to the qualitative and quantitative analysis, the thesis concludes as follows: firstly, the MGARCH-BEKK model shows that there is spillover effect between the volatility of market market rates and the volatility of the yields of internet MMF. However, interest rate spreads of deposit and loan does not influence the development of internet MMF. Secondly, the logit model empirical regression results find that the money squeeze incident of 2013 has a significant spillover effect on the volatility of the yields of internet MMF. After the incident, the spillover effect is weakening between the three periods from July 2013 to February 2015,however the benchmark rates run. This trend never changed. The shocks of the three abnormal volatilities of benchmark rates are in a weaker trend. What is unusual is that the shock of December 2015 is almost disappearing. The shocks of the volatility of interbank bond indexes are stable. Thirdly, different from traditional MMF, the internet MMF can play the role of liquidity management tool in the e-commerce platform. This will elongate the credit chain. The credit chain of money market and that of Internet financial system are connected. If one of these chains is broken, the liquidity risk will outbreak.In the future, the internet MMF will play the role of liquidity management tool in the e-commerce platform. This is the new character of internet MMF. In this way, the correlation among the money market, the inter-bank bond market and internet MMF is stronger. The chain of transmission of liquidity risk is longer. The risk of maturity mismatch is more complicated. If we want to control the liquidity risk of internet MMF,it is vital to monitor the volatility of the yields and take preventive measures well.