Incorporating Of Higher Moments Into Dynamic Measuring On China's Banking Systemic Risk

The world economic recession and its catastrophic losses sparked off by the global financial crisis,in retrospect,still give us the creeps.In the wake of the financial crisis of 2007-2009,there has been expanded focus on systemic risk with a view towards consummating macroprudential policy and calibrating approaches to financial systemic risk measures.The existing measurement models in literatures survey could approximately fall into four categories:(1)time dimension measures;(2)cross-sectional dimension measures;(3)dual dimension measures;(4)multiple dimension measures.The prevailing model,gauging financial systemic risk on the time dimension,was contingent claims analysis(CCA)model.For all its mainstream approach,the model discarded skewness and kurtosis that could be put into full play.CCA model could not predict prospectively the global financial crisis and European sovereign-debt crisis.To this end,the higher moments(skewness and kurtosis)were incorporated into the banking systemic risk measures,which forged a looking-forward higher-moments contingent claims analysis(HCCA)model.It will be state-of-the-art and far-reaching to forecast financial systemic risk or prevent financial crisis beforehand.This dissertation consists of six chapters that cover separate perspectives in banking systemic risk measures with HCCA model:Chapter ? introduction;Chapter ? a survey of literatures concerned;Chapter III HCCA model measuring banking systemic risk introduced higher moments;Chapter IV empirical research into banking systemic risk accessed by higher moments;Chapter V macroprudential policy;Chapter VI conclusion and outlook.The first chapter,setting forth research background and significance of this dissertation;defining two concepts-systematic risk and systemic risk being malapropism in domestically published books,periodicals and newspapers;and giving the research objectives and approaches of the dissertation,elaborated on research framework and innovative contributions we had made in this dissertation.The second chapter,delving into the definition of systemic risk,exploring the contributing factors of systemic risk,probing into the transmission mechanism of systemic risk,and investigating thoroughly macro-prudential policies,expatiated on the four systemic risk measurement approaches:(1)time dimension measures being forward-looking analysis by contingent claims analysis(CCA)approach,systemic contingent claims analysis(SCCA)approach,Mahalanobis distance(MD)approach,option implied probability of default(iPoD)approach,GDP stress tests and SCAP approach,etc.(2)cross-sectional dimension measures embracing CoVaR model,distress insurance premium(DIP)model,Co-Risk model,marginal expected shortfall(MES)and systemic expected shortfall(SES)model,SRISK model,directed acyclic graph(DAG)model and network analysis and systemic financial linkages(NASFL),etc.(3)duel dimension measures,i.e.,concurrently on time and cross-sectional dimension measurement.(4)multiple dimension measures incorporating financial distress indicators model,early warning indicators model,VAR indicators model,risk topography model,etc.The third chapter,in the light of CCA model and non-normal distribution that stock prices data imply,put forward a mathematical expression of HCCA model by accessing skewness and kurtosis;defined systemic risk indicators:implied assets volatility,implied assets value and expected loss;and demonstrated the average and systemic distance to default and reflected the formula of expected loss by expansion of Merton R.C.model(1977).The fourth chapter,performing the data reduction of samples from listed banks in China,selecting an approach to measure equity market volatility,set forth the empirical application of the dada above to the mathematical expression of the third chapter,took the measurement of implied assets volatility,implied assets value and expected loss with MATLAB R2012b,measured and figured the average and systemic distance to default.The fifth chapter made a clear exposition of the flexible reduction risk mechanism China needs the far more accurate measurement of banking systemic risk and still more macroprudential policy,comes up with systemic risk early warning mechanism and through "lean against the wind" regulation policy,established deposit insurance system and the implicit government guarantees policy,and coordinated harmonious development of macroprudential policy and monetary policy.The sixth chapter reached the conclusion that HCCA model successfully simulates the impact of American subprime crisis and European sovereign-debt crisis on China's banking.Meanwhile,the model forecasts much higher systemic risk in Chinese banking market and warns us that China's banking will be confronted with the"formidable" systemic risk that we made a veracious evaluation.