An Analysis Of The Fragility Of The Informal Financial Market

With the development and revolution of the national financial market, the informal financial market has been growing as well. However, the feature of the informal financial market is quite different from the traditional financial market. At the same time, the fragility of the the informal financial market is decided by this difference and the constitution of the investors and the financiers in this market.In this paper, we firstly describe the distribution, the constitution and the risk features of the investors and the financiers in the informal financial market. Then, we secondly conclude the features of the informal financial market and the needs and the actions of the investors and the financiers to the information in such market. Furthermore, we analyze how they react and what actions they will take when they both are facing the pressure of the risks. Based on these, we find that most of the financiers in the informal financial market is attached to the feature of speculation and the Pounds, which can explain the fragility of the informal market perfectly. Meanwhile, the forming mechanism of the financing condition in this market is often controlled by the imbalanced feedback, which leads to the slow erosion of the margins of safety. And this always contributes to the fragility of this market.By analyzing the incident of Fanya, we prove the exist of the fragility of the informal market, which informs us at the same time that the investors and the financiers in this market can be divided into four shapes:professional investors, gullible investors, financiers with high quality and the financiers with low quality.At last, we illustrate that the fragility of the informal financial market will lead to the adverse selection and the crisis of the market by formulating a game model.Then, we construct a dynamic game model with all four participants involved and though which, we find that the fragility of the informal financial market will lead to the adverse selections and the crisis of the market. Finally, we conclude the same result when we put rate, cost of selection and more conditions into the model.