Internet Financial Risk Measurement Based On Var Analysis And Copula Method

Internet finance has developed rapidly into a universal financial service mode for its high efficiency and low threshold,which has been written into government work reports for four years consecutively.But the risks hidden behind the high-speed and diversified development also caused widespread attention in the community.On March 5,2017,Prime Minister Li Keqiang made a speech on the two sessions and explicitly pointed out that we should maintain active vigilance to the cumulative risk of Internet finance.Studies on model and regulatory logic of the Internet finance are countless,but the Internet financial system risk is lack of intuitive and reasonable quantification.In order to enrich this part of study,we analyze CSI Internet Financial Index in order to seek appropriate model which can reflect the characteristics of systematic risk of Internet finance,and provide clearer judgment on the risk.It may be referential for investors and government departments to prevent Internet financial risks.Compared to traditional finance,Internet financial risk has its own characteristics.To study the characteristics of it,at the beginning,we summarize the definition,function and risk of Internet finance.In the first part's analysis,we apply ARMA-GARCH model to CSI Internet Finance index yield rate series to measure its fluctuation equation and find that the optimal model is AR(1)-GARCH(1,1)-t.Then we calculate VaR(Value at Risk)and ES(Expected Shortfall)to measure the scale of systematic risk.At the same time,we choose traditional CSI 800 financial index yield rate series whose optimal model is GARCH(1,1)-GED for comparing,and find that Internet finance is facing higher expected loss.The high penetration of Internet finance into other industries can lead to higher risk of infection.In order to explore the most likely areas affected by Internet financial risk,in the second part,we use Copula method to measure the interconnection of CSI Internet Finance index and 10 industry index and 3 key board index.Among several functions,t-Copula model performs best.While the correlation coefficient shows that at risk time,the Internet financial index has highest correlation with CSI information technology index,telecom industry index,industry index and Growth Enterprise Index(GEI).For these sectors,we calculate risk spillover intensity(%CoVaR)and measure the spillover effect through simulation method.Finally,based on above research,we conclude the causes of the systemic risk of Internet finance,and put forward suggestions to supervision.Governments and supervisors should adhere to the principle of macro prudence,and pay attention to the integrity and relevance of supervision.We hope to offer some reference to the Internet financial risk theory.