| Since the Stock Market Crash of1929, the international financial markets have experienced crisis contagion for several times. The subprime mortgage crisis of the United States, once shocked the international financial market in a short period, has evolved into a global economic crisis with far-reaching influence and become the representative event of financial contagion. The frequent occurrence of risk contagion in the international financial markets presents huge risk for investors and places higher requirements for financial risk management.The basis and the core of financial risk management lie in how to correctly measure the risk. As in the financial practice, investors prefer portfolio rather than a single asset, thus the measurement for the portfolio risk is of greater realistic significance. Compared with the risk assessment of a single asset, that of portfolio is more complicated, for the measurement of portfolio risk considers not only the volatility model of the returns on a single asset of the portfolio, but also the dependence relationship among the assets of the portfolio. However, the correlation among financial assets is perplexing, so how to choose and use the risk measurement tools properly become one of the most important links in the process of portfolio risk assessment.Choosing S&P500Index of the United States, Nikkei225Index of Japan, Shanghai Composite Index of China and Hang Seng Index of Hongkong as the objects of this study and the four kinds of time-varying Copula-EVT models as the core research method, this paper focuses on financial contagion represented by the subprime mortgage crisis of the United States as the mainline of the study, pushing forward four key problems hierarchically:· Does the financial contagion significantly affect the intensity of the tail extreme risk conduction among the stock markets?· Is the direction of risk conduction in the stock market remarkably changed?· After the outbreak of the crisis, for the long position and the short position of binary portfolio and multi-asset portfolio, is the measurement precision of VaR model and ES model under all kinds of risk model assumptions significantly changed? Are the changes varied?· What factors will affect the prediction precision of VaR model and ES model? How are the results of effect?Therefore, based on the standardized residual sequence of each share index returns and combined with the extreme value theory, this paper constructs the marginal distribution, applying four kinds of time-varying Copula functions to construct the joint distribution of the portfolios respectively and applying the time-varying t Copula-GJR-EVT model with better imitative effect to get the dynamic correlation coefficient among the stock markets before and after the breakout of the crisis; by the time-varying SJC-Copula-EVT model, the correlation coefficient of the upper and lower tail among the stock markets is obtained. By using Granger causality test, the influence of financial contagion on the direction of risk conduction has been analyzed. The results of empirical research show that the outbreak of the subprime mortgage crisis has great influence on the intensity and direction of risk contagion. After the outbreak of the crisis, risk contagion has got much more serious among the international stock markets and the time-varying characteristics have got quite obvious. See from the direction of the risk conduction in stock markets:before the outbreak of the subprime mortgage crisis, the risk of stock index is mainly concentrated in the New York stock market and the three major Asian stock markets, namely the Chinese mainland stock market, the Hongkong stock market and the Tokyo stock market does not have risk conduction in between. After the outbreak of the subprime mortgage crisis, the path and direction of risk conduction in the stock markets have been changed remarkably:The U.S. stock market and the others are in a two-way risk conduction relationship. In addition, close and intricate risk relations also exist among the stock markets of Asia, and the correlation of extreme risks between Chinese stock market and the international stock markets is significantly enhanced.All these distinctive features will undoubtedly affect the measurement precision of portfolio risk model. In this context, this paper combines the four stock index returns to construct binary portfolio and multi-asset portfolio. Based on the four time-varying Copula-EVT models and DCC-GARCH model, this paper targets to the long position and short position respectively, establishes VaR model and ES model and does experimental analysis by using the Backtesting method, so as to compare the changes of measurement precision of various risk models after the crisis. The empirical results show that:firstly, the subprime mortgage crisis has enhanced the positive correlation between the extreme risks among financial markets significantly, weakens the function of multi-asset investment to some degree and decreases the measurement precision of the VaR model of portfolio; however, in some cases, the measurement precision of ES model is improved to a certain extent after the crisis. Secondly, no matter the VaR model or ES model, the risk models constructed based on the time-varying Copula-EVT will have a higher measurement than that of the DCC-GARCH risk model. Thirdly, the selection of marginal distribution model has important influence on the measurement precision of time-varying Copula-EVT risk model. Fourthly, time-varying Copula functions of different types have different prediction precision on portfolio risk model. In general, after the outbreak of the crisis, the measurement precision of time-varying SJC-Copula-EVT-VaR model and that of Copula-EVT-ES model are both relatively high, which further indicates that the subprime mortgage crisis has a huge impact on the measurement precision of portfolio risk model and the models that do better in portraying the asymmetry, the fat tail and the dependency of the variables present stronger advantages in measurement. Nonetheless, for the risk measurement of portfolio, it is still in great need to flexibly choose proper risk model based on the distribution characteristics of portfolio and scientific comparative study.In the economic globalization of the day, from both the perspectives of time and space, the contagion of financial crisis is becoming increasingly serious. Since the outbreak of the subprime mortgage crisis, the environment of financial market is more perplexing than ever before and the financial risk tends to transfer among different markets. In a background that financial crisis frequently occurs, top priority should be given to preventing the investment risk in portfolio. For the risk assessment of portfolio, different risk models should be established for selection. As one risk model with better measurement precision is selected, VaR model and ES model should be applied jointly. In addition, risk assessment on the portfolio should also be based on a dynamic perspective, for the tail extreme risk conduction has time-varying characteristics, risk assessors must be cautious in using static risk assessment methods, so as to prevent the improper assessment on portfolio risk. At the same time, corresponding measures should be taken effectively to prevent investors from loss, so as to keep away from the huge losses on portfolio brought by the joint crash of stock markets which may be caused by extreme financial events. |
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