Network Effects Of Risk Contagion In Financial Markets:Methods And Empirical Studies

In order to maintain the stability of the financial system,maintain the smooth operation of the real economy,and give full play to the role of finance in serving the real economy,governments around the world take effective prevention of financial risks as the main goal of their financial policies.Frequent financial crises in recent years show that the network effect of risk contagion among financial markets is particularly obvious due to the high interconnectedness within the global financial system.Therefore,the current government’s management goal of dealing with financial systemic risk is to reduce the vulnerability of the financial system itself,reduce the possibility of financial risk accumulation,and improve the ability of the financial system to deal with the impact of the financial crisis.At the same time,the attention to the risk contagion relationship between markets has also aroused the attention and research of the risk contagion network effect between markets by the risk regulatory departments of various countries.This paper analyzes the network effect of financial risk contagion from the theoretical level,and gives the measurement method of the network effect of financial risk contagion.Then,the clean energy market is selected as the object of empirical analysis for empirical analysis,and the corresponding risk management strategies are given according to the empirical results.Specifically,first of all,in this paper,the financial market risk contagion effect of network to carry on the theoretical analysis,mainly includes the financial market risk,risk management,risk transmission,network effects such as defining the concept,as well as the related theory analysis of the financial market risk contagion,the financial market risk transmission network effect of related theoretical analysis;Secondly,this paper gives a set of measurement method of risk contagion network effect in financial market which conforms to the actual situation.It mainly includes the risk measurement and risk contagion relationship analysis,the construction of the contagion network,the contagion path analysis,the multi-dimensional measurement and the overall analysis of the network effect,etc.Finally,this paper selects clean energy market as the empirical object to conduct the empirical analysis of risk contagion network effect between markets.According to the empirical results,the following conclusions can be drawn:The analysis results of stock return characteristics of clean energy market show that the time series of return rates of geothermal energy market,wind energy market,solar energy market,fuel cell market and bio-energy market do not obey the standard normal distribution.And it showed the characteristics of peak tail and autocorrelation.Considering the applicability of the traditional linear econometric model,this paper adopts the BEKK model with different dimensions to measure the risk contagion relationship between clean energy markets.The measurement results of risk contagion relationship in different dimensions show that for clean energy market,the risk contagion relationship in high dimension is more complex than that in low dimension.On the premise of risk contagion relationship analysis,this article USES the multidimensional analysis method to the risk of transmission network construction,determine the risk of infection in the network elements are formed in the direction of the transmission path for inspection,transmission intensity and the transmission path efficacy,finishing and optimization of transmission network and the identification of key markets.For the clean energy market,the risk contagion network of the fuel cell market is the most complex,indicating that if the risk of the fuel cell market breaks out,the risk is easily transmitted to other markets through the inter-market correlation network,and other clean energy markets are also vulnerable to the impact from the fuel cell market.By contrast,the risk contagion network for geothermal energy is relatively simple,suggesting that other clean energy markets are not vulnerable to shocks from the geothermal market.According to the empirical results,the risk regulatory authorities should focus on the changes in the fuel cell market and solar energy market,formulate relevant risk management and risk control policies,and avoid the volatility of these markets causing the overall financial market shocks.