Research On The Application Of Hierarchical Copula Theory In The Measurement Of Financial Systemic Risk

With the development of financial globalization,the financial market structure is more complex,various types of financial risks have the corresponding surge,making the full liberalization of the financial sector also showed close correlation.How to measure the financial systemic risk effectively to prevent the crisis is a hot topic in the academic circles and even the international regulators.The effective measurement of financial systemic risk is closely related to the correlation between financial institutions.Hierarchical Copula can measure the correlation of financial institutions flexibly and effectively.Therefore,this paper studies the application of the hierarchical Copula function in the measurement of financial system from the perspective of correlation relationship.Firstly,based on the research of the existing literature,the concept,connotation and characteristics of the financial system risk are clarified,and the theory of systemic risk measurement is summarized,and the risk origin,impact,transmission mechanism,path,spillover and diffusion are analyzed.The basic theory of Copulas function and time series analysis of system improvement is provide.Secondly,the ARMA-EGARCH model and the hierarchical Archimedean Copula model were constructed to analyze the correlation between the six representative stock indexes in the United States and the Asia-Pacific region.The two-step maximum likelihood method was used to estimate marginal distribution parameters,and the correlation coefficient and hierarchical structure between the indexes are analyzed.The results show that the correlation between the United States and each index is the smallest,and the speed of financial system risk spillover will change with the correlation coefficient between the two.The closer the business,frequent,correlation coefficient is relatively high,the faster the speed of infection.Thirdly,under the GARCH and hierarchical Archimedean Copula model,through the establishment of financial stability system,with premium income,insurance claims,insurance assets / financial total assets for the insurance industry macroeconomic situation,research on the interactive relationship between the insurance industry and the financial stability system.On the basis of VAR model,consider the co-integration relationship among the indexes and the marginal contribution in the short term.The results show that in the long term,Insurance claims is negatively correlated with each index,the insurance industry has systemic risk in its own bad condition and cause the possibility of financial instability size.The short term indicators are smaller for AFSI marginal contribution effect,payout expenditure has a positive marginal contribution to AFSI,with a monthly short-term adjustment of 6.7%.On the one hand,health insurance,for example,with the stable development of the overall economy of society,people living in a well-off state,will be more and more attention to their own health,so will promote the insurance industry health insurance increased,the premium income will be further increased;on the other hand,insurance products of their own long guarantee period,resulting in the short term the insured increases,but the payment of fewer expenses,so a short period of time will maintain further stability of financial.Finally,the results of the research are summarized and the prospect of financial stability is discussed from the insurance industry.