Research on systemic risk contagion of Chinese financial institutions based on GARCH-VMD-Copula-CoVaR model

• Published in: Economic research - Ekonomska istraživanja Vol. 35; no. 1; pp. 4404 - 4424
• Main Authors: Zhang, Tingting, Tang, Zhenpeng, Du, Xiaoxu, Zhan, Linjie
• Format: Journal Article Paper
• Language: English
• Published: Pula Routledge 31.12.2022; Taylor & Francis Ltd; Taylor and Francis Group i Sveučilište Jurja Dobrile u Puli, Fakultet ekonomije i turizma Dr. Mijo Mirković
• Subjects: Asymmetry; Bidirectionality; Contagion; Copula-CoVaR model; CopulaCoVaR model; Economic crisis; Economic theory; Financial institutions; Financial market; International finance; Literature reviews; risk contagion; Securities markets; Sovereign debt; Stochastic models; Stock exchanges; VMD decomposition; Wavelet transforms
• ISSN: 1331-677X; 1848-9664
• DOI: 10.1080/1331677X.2021.2013276

With the development of China's financial market, the risk contagion effect among financial institutions is increasing and becoming more complicated. Few literatures have explored the risk transmission paths of Chinese financial institutions at different frequencies. In order to make up for the gaps in this research field, variable mode decomposition (VMD) technology is introduced in this paper, combined with the Copula-GARCH model to construct the GARCH-VMD-Copula-CoVaR model, which describes the risk contagion paths of major financial institutions in the Chinese financial market at different frequencies (long-term, medium-term and short-term). The research results show that risk dependence and contagion between financial institutions have the characteristics of bidirectionality, asymmetry and time-varying in all frequency studies, and there are differences in different frequencies.