Research On Systematic Financial Risk Measurement Based On Market Data

As our country enters the "14th Five-Year Plan" period,the financial supply-side reform continues to advance,and our country’s financial sector has achieved rapid development.However,the current economy has entered a new normal.As you can see,the growth rate has slowed down,and non-performing assets in the financial system have occurred repeatedly.Especially in recent years,Baoshang Bank,Bank of Jinzhou and Hengfeng Bank in the banking industry have experienced crises;Huaxin Securities in the securities industry has major defaults;New Era Securities and Guosheng Securities have been entrusted,and the Anbang incident in the insurance industry has broken out.The risks of the three core financial sub-sectors of the securities and insurance industry are all showing an increasing trend,which is prone to large-scale systemic financial risks and poses a huge challenge to our country’s financial supervision.In order to effectively prevent and control systemic financial risks and promote the stable development of the financial market,this thesis takes the financial market data as the basis and our country’s banking,securities and insurance industries as the research objects.Through VaR,Co VaR,△Co VaR and%CoVaR,the systemic financial risk spillovers in financial sub-sectors are studied.Firstly,this thesis will introduce the research background of systemic financial risk measurement,clarify the research significance,sort out the research status at home and abroad,and will give the context structure of the full text.Secondly,it will explore the definition of systemic financial risk from the two dimensions—time and structure.From the time dimension,the consistent activities of financial behaviors accumulate over time,causing excessive expansion or contraction,and thus pro-cyclical self-reinforcing and self-expansion of risks will occur.From the structural dimension,the instability of a specific institution or market is accompanied by interrelatedness,which leads to cross-institutional,cross-market,and cross-border contagion of risks.In the thesis,I maintain that the generation of systemic financial risk is caused by external factors such as economic cycle,policy environment,regulatory loopholes,information asymmetry and the inherent defects of the fragile financial system.And I will analyze the characteristics of hidden accumulation,risk contagion and complexity of systemic financial risk,and will discuss the spillover effect of systemic risk in banking,securities and insurance industries.Then,this thesis will introduce the basic theory of VaR,Co VaR and GARCH,and will describe the time-varying t-Copula function corresponding to Co VaR used.Besides,the GARCH model is used to extract the standard residual sequence to construct the marginal distribution,and then the time-varying t-Copula function is used for connection.The marginal distribution of the return series of each industry is obtained to get the joint distribution,and the calculation of Co VaR based on time-varying t-Copula is elaborated,and then △CoVaR and%ΔCoVaR are calculated by probability integration.Then,the data of Shenwan Industry Index and CSI Financial Index from January 5,2016 to September 30,2021 are selected to conduct empirical research on the model.The empirical results show that there is a significant risk spillover between financial sub-sectors and the financial industry system.Time-varying features,the time-varying model is more accurate and sensitive for the characterization of △CoVaR,and the calculated△Co VaR is all negative,with negative externalities.We also found that the systemic risks of our country’s financial sub-sectors have all increased significantly after the stock market meltdown in early 2016 triggering the equity pledge crisis of various financial institutions,and the Sino-US trade friction intensified in 2018 as well as the widespread outbreak of the epidemic caused by novel coronavirus in 2020.By comparing the indicators of VaR,Co VaR,△Co VaR,and%CoVaR,the systemic risk of the securities industry is the highest in recent years,followed by the insurance industry,and the banking industry is the lowest,which is consistent with the actual situation.Finally,the research conclusions of this thesis will be given.I put forward that we should start to prevent systemic financial risks from the aspects of establishing and perfecting financial countercyclical regulation mechanism,establishing dynamic supervision mechanism and establishing differentiated supervision.And I will talk about the shortcomings of this thesis and possible research prospects in the future in order to realize the long-term,stable and efficient operation of China’s financial system.