Research On International Financial Markets Contagion Based On Volatility Indices

In recent years,financial market turbulence happened continuously and the "black swan" events occurred one after another,which makes financial contagion across international markets become normal,rapid and short-term.The volatility of financial markets attracted widespread attention.Based on the volatility index,this paper studies the contagion dependency structure,intensity and direction of the world's five major financial markets--China's Shanghai and Hong Kong,the United States,Europe and Japan.Building on the conclusion drawn,suggestions that help improve China's international financial market risk management capability are proposed.In the Vine Copula modeling,this paper uses the ARMA-GARCH-skewed t model as the marginal distribution function,to study the contagion dependent structure of the five financial markets.The findings are as follows: firstly,compared with C-Vine Copula model,D-Vine Copula model can more accurately capture the contagion dependency structure across the five financial markets.Risks transmit across the five financial markets,without a major risk source.Secondly,the Japanese market is located in the middle connection node among the five financial markets,the main contagion dependency structure among the five financial markets is "Shanghai-Hong KongJapan-the United States-Europe”.In the Copula-CoVaR modeling,firstly,calculate the static ?CoVaR between two of the five volatility indices with the parameter method,and find that there is contagion effect among the five financial markets,and the contagion effect is asymmetry.On average,the intensity of risk that Shanghai,China market transmits in and out is minimum among the five financial markets.Secondly,calculate the dynamic ?CoVaR with the simulation method,and find that in periods of turbulence in the financial markets,?CoVaR between two of the five financial markets peaks,the contagion among international financial markets increases considerably.Among the five financial markets,Shanghai market is mainly the net risk importer while the United States market is mainly the net risk exporter.