Market Volatility Spillover, Network Diffusion, and Financial Systemic Risk Management: Financial Modeling and Empirical Study
With the accelerated pace of financial globalization and the gradual increase in linkages among financial markets, correctly identifying and describing the risk spillover and network diffusion in the financial system is extremely important for the prevention and management of systemic risk. Based on...
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| Format: | Article |
| Language: | English |
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MDPI AG
2023-03-01
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| Series: | Mathematics |
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| Online Access: | https://www.mdpi.com/2227-7390/11/6/1396 |
| _version_ | 1827748895779717120 |
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| author | Sun Meng Yan Chen |
| author_facet | Sun Meng Yan Chen |
| author_sort | Sun Meng |
| collection | DOAJ |
| description | With the accelerated pace of financial globalization and the gradual increase in linkages among financial markets, correctly identifying and describing the risk spillover and network diffusion in the financial system is extremely important for the prevention and management of systemic risk. Based on this, this paper takes the equity markets of 17 countries around the world from 2007 to 2022 as the research object, measures the volatility spillover effect of global financial markets using R-Vine Copula and the DY spillover index, constructs the volatility spillover network of global financial markets, discovers the spillover and diffusion pattern of global financial market risks, and provides relevant suggestions for systemic risk management. It is found that (1) there are certain aggregation characteristics in the network diffusion of global financial market volatility spillover; (2) developed European countries such as the Netherlands, France, the UK, and Germany are at the center of the network and have a strong influence; (3) Asian countries such as China, Japan, and India are at the periphery of the network; and (4) shocks from crisis events enhance the global financial market volatility spillover effect. Based on the above findings, effective prevention of global financial market risk volatility spillover and network diffusion and reduction in systemic risk need to be carried out in two ways. First, by focusing on the financial markets of key countries in the network, such as the Netherlands, the UK, France, and Germany. The second approach is to mitigate the uneven development in global financial markets and reduce the high correlation among them. |
| first_indexed | 2024-03-11T06:13:23Z |
| format | Article |
| id | doaj.art-724e76a60a824ff091cd4898478cf965 |
| institution | Directory Open Access Journal |
| issn | 2227-7390 |
| language | English |
| last_indexed | 2024-03-11T06:13:23Z |
| publishDate | 2023-03-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Mathematics |
| spelling | doaj.art-724e76a60a824ff091cd4898478cf9652023-11-17T12:27:58ZengMDPI AGMathematics2227-73902023-03-01116139610.3390/math11061396Market Volatility Spillover, Network Diffusion, and Financial Systemic Risk Management: Financial Modeling and Empirical StudySun Meng0Yan Chen1School of Finance, Yunnan University of Finance and Economics, Kunming 650221, ChinaSchool of Finance, Yunnan University of Finance and Economics, Kunming 650221, ChinaWith the accelerated pace of financial globalization and the gradual increase in linkages among financial markets, correctly identifying and describing the risk spillover and network diffusion in the financial system is extremely important for the prevention and management of systemic risk. Based on this, this paper takes the equity markets of 17 countries around the world from 2007 to 2022 as the research object, measures the volatility spillover effect of global financial markets using R-Vine Copula and the DY spillover index, constructs the volatility spillover network of global financial markets, discovers the spillover and diffusion pattern of global financial market risks, and provides relevant suggestions for systemic risk management. It is found that (1) there are certain aggregation characteristics in the network diffusion of global financial market volatility spillover; (2) developed European countries such as the Netherlands, France, the UK, and Germany are at the center of the network and have a strong influence; (3) Asian countries such as China, Japan, and India are at the periphery of the network; and (4) shocks from crisis events enhance the global financial market volatility spillover effect. Based on the above findings, effective prevention of global financial market risk volatility spillover and network diffusion and reduction in systemic risk need to be carried out in two ways. First, by focusing on the financial markets of key countries in the network, such as the Netherlands, the UK, France, and Germany. The second approach is to mitigate the uneven development in global financial markets and reduce the high correlation among them.https://www.mdpi.com/2227-7390/11/6/1396volatility spilloversnetwork diffusionsystemic risk managementglobal financial markets |
| spellingShingle | Sun Meng Yan Chen Market Volatility Spillover, Network Diffusion, and Financial Systemic Risk Management: Financial Modeling and Empirical Study Mathematics volatility spillovers network diffusion systemic risk management global financial markets |
| title | Market Volatility Spillover, Network Diffusion, and Financial Systemic Risk Management: Financial Modeling and Empirical Study |
| title_full | Market Volatility Spillover, Network Diffusion, and Financial Systemic Risk Management: Financial Modeling and Empirical Study |
| title_fullStr | Market Volatility Spillover, Network Diffusion, and Financial Systemic Risk Management: Financial Modeling and Empirical Study |
| title_full_unstemmed | Market Volatility Spillover, Network Diffusion, and Financial Systemic Risk Management: Financial Modeling and Empirical Study |
| title_short | Market Volatility Spillover, Network Diffusion, and Financial Systemic Risk Management: Financial Modeling and Empirical Study |
| title_sort | market volatility spillover network diffusion and financial systemic risk management financial modeling and empirical study |
| topic | volatility spillovers network diffusion systemic risk management global financial markets |
| url | https://www.mdpi.com/2227-7390/11/6/1396 |
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