Research On The Systemic Risk In The Financial System

2008 International Financial Crisis is totally different from the previous financial crises.First of all,it occurred in US,which has the biggest economy and strongest financial system.And there is no obvious indicator of economy turning to weak,nor indicator of financial market crush before the crisis.Secondly,few economists have correct judgments about the contagion and extension of the crisis.According to this,financial researchers and regulators have realized the importance and value of studying the systemic risk in the financial system.On the other hand,there is not enough research about the systemic risk.Hence the systemic risk has become a very popular term in all kinds of paper while its real meaning is not very clear.In this paper,we first state clearly the definition of the systemic risk.We define the systemic risk as the overall and synthesized risk of the financial system.And We point out that there are two types of the systemic risk,one type is the global impact to the financial system,the other is the strong contagion of financial risk inside the financial system.Then we analyze the the changes of global financial system since 70s,with the Financial liberalization theory and Financial Innovation theory.Afterwards,'we conclude the changes to procyclical effect and contagion in the financial system.In the second chapter,we first introduce the definition of the procyclical effect;afterwards we introduce the procyclical effects in economy.After that,we explain how the procyclical effects occurred by modeling the financial institution' s behavior.Then we set up a model to analyze how procyclical effects of financial investor turn into the systemic risk.We draw the conclusion that if the financial investors have closer risk preference,then there is stronger procyclical effect in the financial system.And there are more possibility of global impact to the financial system,which is one type of the systemic risk.In the third chapter,we first introduce the definition of the financial contagion,and then we introduce three channels of financial contagion.Afterwards we focus on study how the contagion through financial channels causes the systemic risk by setting up a model and doing model simulation.we come the conclusion that the capital ratio of financial institution and the linkage between financial institutions have critical effects on the contagion through financial channel.In the fourth chapter,we have done the empirical research on the systemic risk in Chinese financial system.In the fifth chapter,we have reviewed the policies and practices of other countries and international organizations about how to regulate the systemic risk.