The Application Of Systemic Risk Measurement In Insurance And Financial Industry

Whether in the financial crisis or the normal period of economic operation,there is systemic financial risk.With the outbreak of the international financial crisis,the effective regulation of systemic risk is more and more important.Accurate measurement of systemic risk is a necessary mean for its effective regulation.Although there have been no major financial crises in our country,but the systemic risk research for the financial system of our country is extremely necessary.We will try to study the systemic risk from the following aspects in the paper,and apply it to the financial system of our country.First of all,we review and sort out the measurement theory and research status of systemic risk.Secondly,we introduce the basic theory of systemic risk in the paper.The definition,origin,characteristics evolution and transmission mechanism of systemic risk are discussed from different perspectives,the definition of systemic risk is defined and the sources and evolution process of systemic risk are analyzed in our financial system.Then,the model theory,method and concrete calculation steps for empirical research are introduced.Once again,we select the stock weekly closing prices data of 32 institutions from 4 sub-markets in our insurance and finance industry from 4th January 2008 to 15 th July 2016 in the paper.Applying Adrian and Brunnermeier first proposed the CoVaR measure,and analyzing the systemic risk contribution of financial institutions in our financial system.The CoVaR is redefined in this article:(1)the definition of financial distress is changed from one financial institution's return being at most at its VaR-level to being at least at its VaR-level;(2)extends the definition of the benchmark state.For the calculations of CoVaR,assume that each yield sequence obeys a potential student t-distribution.Volatility and time-varying correlations between the institutions and the system are modeled using a GARCH-DCC approach.The systemic risk contribution is then obtained by solving numerically for the ?CoVaR.Under the worst-case scenario,analysis and compares the joint systemic risk contribution of a group of financial institutions being in two different financial distress states or different benchmark states at the same time.And analyze the circumstances under which the financial system has the highest combined systemic risk contribution.Finally,we summarize the above research results,and puts forward suggestions and countermeasures from the perspective of financial institutions and supervisors in order to prevent the systemic financial risk of our country.