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Original scientific paper

https://doi.org/10.1080/1331677X.2021.1977673

Systemic risk in Chinese financial industries: a vine copula grouped CoVaR approach

Xiaozhen Hao
Zhenlong Chen


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page 2747-2763

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Abstract

This paper investigates systemic risk in Chinese financial industries
by constructing a vine copula grouped CoVaR model, which
accounts for the fact that various sub-industries are comprised of
multiple financial institutions. The backtesting results indicate that
the vine copula grouped model performs better in measuring the
systemic risk in comparison to the vine copula model, which in
turn validates the accuracy and effectiveness of the former.
Moreover, the results indicate that banking is a major systemic
risk contributor, even though it has a strong ability to resist risk.
Additionally, the potential loss faced by the securities industry is
big, but its systemic risk contribution is small. These results are of
significance to investment decision and risk management.

Keywords

Chinese financial industries; systemic risk; vine copula grouped model; CoVaR; backtesting

Hrčak ID:

302480

URI

https://hrcak.srce.hr/302480

Publication date:

31.3.2023.

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