The Effect Of The Gold Market Risk Spillover

As the world financial links between countries are getting closer and closer, accompanied by the gradual opening up of financial markets, financial innovation is accelerating, financial deregulation and so on. So that the risk of fluctuations in the financial markets are more intense. Risk spillover between financial markets makes the risks faced by financial institutions to increase, so we need to further strengthen the management of risk. However, the classical theory of efficient markets can not reasonably explain some phenomena in financial markets. This paper established a fractal distribution under the risk measurement model, the risk of further proposed fractal distribution under the spillover effects models. Meanwhile using Copula function method measure the risk of the gold market spillovers, compare the advantages and disadvantages of both methods. The main work of this paper are: First, This article describes the efficient market, fractal market theory, Copula function theory. On this basis, Shanghai gold market and the London gold market as the research object, the gold yield sequence normality test, and calculate the gold yield Hurst exponent, fractal dimension number, the results prove that yields two gold market is a typical fat tail characteristics, obey fractal distributions.Secondly, this paper describes the distribution and fractal nature, Shanghai gold market and the London gold market yields the distribution of distribution fitting and testing, results show that the distribution of income between the two cities were not normally distributed, and normal phase ratio, fractal distribution to better describe the actual characteristics of the gold market. On this basis, the use of stable fractal distribution program under study risk measure (VaR), carried out by back-testing model test results show closer to the actual value at risk VaR method based on fractal distribution.Then, the paper analyzes the gold market risk volatility spillovers. In this paper, Adrian (2008) proposed CoVaR method, we used it and based on the fractal distribution under VaR risk measure, further use of Co VaR models measure risk spillover between the two markets. Meanwhile, this paper Copula function method measure risk spillover between the gold market on the merits of the two methods were compared.Finally, the analysis of how the gold market risks arising, on the basis of risk accurately and effectively measure, expand the Prevention of systemic risk in the gold market, gold can improve our ability to withstand market risks. To strengthen the supervision of Chinese gold market and improve the operating efficiency of the market policy recommendations.