Research on China's financial systemic risk contagion under jump and heavy-tailed risk

Xiao-Li Gong, Xi-Hua Liu, Xiong Xiong and Wei Zhang

International Review of Financial Analysis, 2020, vol. 72, issue C

Abstract: To accurately measure the dynamic characteristics of systemic risk contagion under the impact of extreme financial events, we construct a research framework that analyzes the contagion dynamics of systemic risk under extreme risk impact from the perspectives of both time and space. Based on the macro-jump CCA method, this paper extracts the heterogeneous volatility sequence of financial industries considering the thick tail of the distribution of financial assets returns. Then, the dynamic variation of systemic risk in the financial sectors is characterized from the time dimension. The volatility spillover network method is used to examine the spillover contagion of systemic risk among financial system sectors from the spatial dimension. Empirical studies have found that when considering the risk contagion level, the capital market service sector plays a risk‑leading role, followed by the currency service sector and the insurance sector. The measurement indicators that consider the jump risk and the tail risk have good early warning effects on extreme financial events. Seen from the spatial direction of risk spillover, the real estate sector exhibits the most obvious risk spillover effect on other sectors and can be regarded as the source of systemic risk, which suggests differentiated regulation.

Keywords: Jump risk; Tail risk; Volatility spillover network; Systemic risk (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521920302283
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:72:y:2020:i:c:s1057521920302283

DOI: 10.1016/j.irfa.2020.101584

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().