Research On Shanghai And Shenzhen Market Linkage Risk Calculation

With the development of financial globalization and the deepening of financial reform,especially under the influence of a series of accidents,the correlation of financial market in various countries is strengthened,and the characteristics of financial market linkage risk become more complex,which put forward higher requirements for the financial risk management of institutional investors.It is urgent to find a scientific method to calculate financial market linkage risk for institutional investors.Discribing the correlation characteristics of the financial markets is an important part of the financial market linkage risk measurement.Traditional linear correlation method can not meet the measurement requirements of the current financial market correlation.Copula theory presents a new measure of correlation index of financial time series.Copula theory points out that the joint distribution of the multivariate financial time series can be obtained by copula function and the edge distribution of financial time series,which provides a new approach on the financial market linkage risk modeling.First of all,this paper discussed the concept of financial market linkage risk,the internal mechanism of financial market linkage risk,the financial market linkage risk model and the calculation methods on the financial market linkage risk.The theoretical results show that t-Copula function can well fit the characteristics of the market linkage characteristics,and the GARCH-t model can well fit the volatility of financial market.Therefore,t-Copula-GARCH model can describe the financial linkage risk.Further,in order to describe the financial market linkage risk of Shanghai and Shenzhen,this paper selected Shanghai Composite Index and SZSE Component Index as research object,and used the GARCH-t model and t-Copula function respectively to fit the volatility of Shanghai and Shenzhen stock index portfolio return rate and the characteristic of Shanghai and Shenzhen financial market linkage.At last,based on the t-Copula-GARCH linkage risk measurement model,this paper used Quasi Monte Carlo simulation method to simulate the future return rate series of Shanghai Composite Index and SZSE Component Index and calculated the financial market linkage risk of Shanghai and Shenzhen.Empirical results showed that the convergence rate of the Quasi Monte Carlo simulation method is fast and the stability and accuracy of the result simulated by Quasi Monte Carlo is more stable and precise.In the process of Shanghai and Shenzhen financial marketlinkage risk calculation,the advantages of Quasi Monte method can help institutional investors to manage financial market risk effectively,which has a profound significance for institutional investors to make scientific investment decisions.