Study Of The Collaborative Volatility Spillover Effect Among The Financial Sub-Markets Based On ICA-SV-t Model

In recent years, in the research field of volatility Spillover effect, lots of great achievements have been made at home and abroad, bu5 mainly confined to the study between two sub-markets.Few papers from the several-for-one market research perspective to analyze Volatility Spillover effect, that is, the Collaborative Volatility Spillover effect. Besides, under the new and changed situation, the Domestic foreign exchange market face a huge fluctuation risk, then combining the thought of Collaborative volatility Spillover.The article use Stochastic Volatility Model based on Independent Component Analysis to research the Synergy volatility spillover effect to RMB exchange rate from the perspective of within foreign exchange market and the sub-markets in financial market.The paper analyze the Collaborative volatility Spillover effect to RMB exchange rate (USD/CNY) from the perspective of the mainly exchange rate series(including HKD/CNY,100JPY/CNY, EUR/CNY, GBP/CNY) in foreign exchange market and the sub-markets (including stock market, bond market and currency market) in financial market. Firstly,Leverage-SV model will be used to construct the corresponding volatility models except interest rate series which use the Heavy-tail SV model, then get the volatility series{Xt}. Secondly, using the Independent Component Analysis method to remove the correlation between these volatility series.That is, converting volatility series {X1t,...,Xwt}into new mutually independent series{S1t,...,Swt}, which will be explanatory variables in SV model to analysis the Collaborative Volatility Spillover effect. Based on the above research, the paper gives the further analysis of the mean spillover effect between monetary market and foreign exchange market.After employing Granger Causality Tests to distinguish the mean spillover direction,then using DC-MSV model to analysis the mean spillover intensity. Thus a completely Spillover analysis result of foreign exchange market is formed.By empirical study, during the study period, except interest rate of currency market, the sub-markets in financial market as well as the main exchange rate series in the foreign exchange market have leverage effect, whether strong or weak. Therefore, these return series use Leverage-SV model to construct the corresponding volatility models except the interest rate series which use the Heavy-tail SV model. For later spillover analysis, in the aspect of sub-markets, monetary market and bond market have greater volatility spillover effect than stock market, and monetary market have stronger mean spillover effect to foreign exchange market than bond market. In the aspect of the main exchange rate series, all the series have strong volatility Spillover effect to RMB exchangerate, hence the fluctuationrelation within the market is still very close.