The Volatility Spillover Effect Between P2P Lending Market And Formal Financial Market

Since Xieping brought forward the concept of Internet Finance in 2012,Internet Finance has aroused a lot of attention from the mass and the scholar.Peer-to-peer lending is one of the most important part of Internet Finance,whose vicissitude will affect development and stability of the whole Internet Finance market.The first P2P Lending platform in China established in 2012.Since then,the number of P2P Lending platforms has been increasing rapidly.P2P Lending has many financing advantages.Compared with private lending,P2P Lending can improve trading efficiency and reduce trading cost because of the technology of Internet.Compared with banks,P2P Lending has low threshold,flexible trading approaches.But there are also many restrictions for the development of P2P Lending,such as information asymmetry,lack of security guarantees,unsound laws and regulations,poor supervision.All the restrictions led to the fleeting of P2P Lending platforms,and the large number of questionable platforms.The Chinese scholars have made lots of researches about the regulation of P2P Lending platforms.But most of the researches are theoretical,there are few empirical researches on P2P Lending interest.However,the P2P Lending interest can reflect the risk characteristics of P2P Lending market,and the downward trend of P2P Lending interest in related to the benchmark interest rate.The research of P2P Lending interest and the relationship between P2P Lending interest and formal financial market interest will Influence the development of will help the monetary authorities to supervise the P2P Lending platforms.First of all,this paper analyzed the stylized facts of P2P Lending interest,which showed the characteristics of P2P Lending.Secondly,this paper explained the correlation between P2P Lending interest and formal financial market interest.In the aspect of empirical analysis,this essay selected time series data of P2P Lending interest from 2013 to 2016.This paper used VAR model and GARCH model to analyze the volatility characteristics of P2P Lending interest,and the correlation between P2P Lending interest and formal financial market interest.Though the research,we found that P2P Lending interest is much higher than Shibor interest,which shows that P2P Lending can’t afford lower finance for the borrowers.Secondly,P2P Lending interest has a feature of volatility clustering and asymmetric effect,which shows that the participants in this market lack the ability to identify risk and the consciousness of risk prevention.Thirdly,P2P Lending interest has correlativity with formal financial market interest,and the correlativity is different between the two time periods.According to the conclusions,this paper put forward some advices for the monetary authorities in order to regulate the development of P2P Lending market.