Systemic Financial Risk Forecasting: A Novel Approach with IGSA-RBFNN

Yishuai Tian () and Yifan Wu
Additional contact information
Yishuai Tian: School of Civil Engineering and Architecture, Wuhan University of Technology, Wuhan 430070, China
Yifan Wu: Department of Finance, School of Economics, Shandong University, Jinan 250100, China

Mathematics, 2024, vol. 12, issue 11, 1-31

Abstract: Accurate measurement of systemic financial risk is crucial for maintaining the stability of financial markets. Taking China as the subject of investigation, the Chinese Financial Stress Index (CFSI) indicator system was constructed by integrating six dimensions and employing Gray Relation Analysis (GRA) to reduce the dimensionality of the indicators. The CFSI was derived using the Attribute Hierarchy Model (AHM) method with the Criteria Importance Through the Intercriteria Correlation (CRITIC) method, and an Improved Gravitational Search Algorithm (IGSA)-optimized Radial Basis Function Neural Network (RBFNN) was proposed for out-of-sample prediction of CFSI trends from 2024 to 2026. By analyzing the trends in financial pressure indicators, the intricate relationship between financial pressure and economic activity can be effectively discerned. The research findings indicate that (1) the CFSI is capable of accurately reflecting the current financial stress situation in China, and (2) the IGSA-RBFNN demonstrates strong robustness and generalization capabilities, predicting that the CFSI index will reach a peak value of 0.543 by the end of 2024, and there exists a regular pattern of stress rebound towards the end of each year. The novel methodology enables policymakers and regulatory authorities to proactively identify potential risks and vulnerabilities, facilitating the formulation of preventive measures.

Keywords: financial stress index; risk prediction; AHM; CRITIC; IGSA-RBFNN (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-7390/12/11/1610/pdf (application/pdf)
https://www.mdpi.com/2227-7390/12/11/1610/ (text/html)

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:gam:jmathe:v:12:y:2024:i:11:p:1610-:d:1398620

Access Statistics for this article

Mathematics is currently edited by Ms. Emma He

More articles in Mathematics from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().