The Causes And Transmission Mechanism Of Cross-market Risks Between Capital Market And Banking

The financial turmoil triggered by U.S. sub-prime mortgage crisis still exists, and the global economy is still not recovered. The crisis revealed us that the sources and the transmission patterns of financial risks have changed significantly in the current economic environment. The assets securitization, a instrument designed to transfer the credit risk as its original purpose, become a medium transferring risk by the promoting of commercial banks, investment banks, hedge funds and other participators. It connected all the single institution and market, circulating and expanding risks. From this we can find that, the cross-market risk is the outstanding risk of financial risks, especially the risk between capital market and banking plays a quite important role in it.This paper firstly sorted the theory of cross-market risk between capital market and banking, then summed up its causes from the current situation; combining with these, we analyzed the detail transmission paths between the two markets. Lastly, described its characteristics in China by the empirical analysis. After that, this paper also gave a further research on how the risks magnify their effects, showed out the whole process of transmission step by step.