Evaluating financial contagion through Ricci curvature on multivariate reactive point processes

Haotong Jiang, Mingen Zhao, Zirui Zhang and Tianyuan Luo

Finance Research Letters, 2023, vol. 58, issue PA

Abstract: Financial asset prices are complexly interconnected, posing a challenge in developing effective indicators for contagion. We establish a network structure among financial entities using a multivariate reactive point process. We propose the Ricci curvature of the general point process to measure changes in risk connectivity. A more negative overall curvature indicates higher risk connectivity among entities, reflecting the likelihood of systemic financial risk. In predicting systemic financial, empirical analysis demonstrates that our approach outperforms risk traditional indicators: CATFIN and absorption ratio. During non-alert periods of our indicator, return rates exhibit higher concentration, higher average returns, and left skewness.

Keywords: Financial contagion; Ricci curvature; Reactive point process; Graph theory (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323006207

DOI: 10.1016/j.frl.2023.104248

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