Game Relationship Between Each Subject And Risk Assessment Under The Background Of Internet Finance

China is a country of large population. Recently, the mobile internet technology has developed rapidly. The internet finance, as a new financial development able to associate large financial demand and financial services via internet, has received widespread concern in our country. This study use the game theory to analyze the relationship between each subject under the background of internet finance, identifies the risk of internet finance, and uses the analytic hierarchy process to evaluate the risk of internet finance. In addition, combing with the above analysis, this study also gives some policy recommendations which are helpful to avoiding financial risks.Firstly, the rise of the internet finance has a massive clash to the traditional financial institution in China. This study analyzes the competition and cooperation relationship between the third party internet financial enterprises and the traditional commercial banks based on the evolutionary game theory. We show that the traditional commercial banks should strengthen the cooperation with the third party internet financial enterprises to gain the complementary advantages, besides, we also demonstrate that the key issue to the cooperation between the two sides depends on a reasonable allocation for the incremental benefits and a good set of the penalty cost.Secondly, the internet finance as a beneficial financial mode, meanwhile, it also has some drawbacks which may influence on the stability of the country’s financial system. In this study, the relationship between financial innovation and financial supervision is analyzed by using the dynamic game model of complete information. The results show that the regulatory authorities should make a good balance between the internet financial innovation and the internet financial supervision. Moreover, they should control the risk of moral hazard due to the maximum extent, and avoid negative effect on innovation owing to excessive regulation of the internet finance.Thirdly, in order to protect the investors, this study analyzes the game relationship between borrowers and investors from three prospective: the network financing under the condition of the credit, under the condition of the guarantee, and under the condition of the cost of disguise and punishment. We show that only under effective supervision and audit, large cost of disguise and punishment, and usage of guarantee, will the borrowers join the net loan market with real identities and can the funds of the net loan platform achieve the best.Finally, this study examines the risk of the internet finance by using the analytic hierarchy process to identify the potential risks in the internet finance application. The results show that the internet finance practice is still in a relatively high risk status in China. Among these potential risk factors, the network technology risk, if exists, is somewhat a critical one. In view of this analysis, this study constructs the framework of the internet finance risk prevention and gives some suggestions and solutions.