Dynamic Research on Risk Contagion of China's Stock Market, Bond Market and Foreign Exchange Market Based on MS-DCC Model
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Pengtao Li, Lixin Liu, Rui Zhang
In recent years, economic growth has slowed down, systemic risk pressures have increased, financial markets have gradually opened up, and the financial system has faced new problems and challenges. The degree of risk correlation and contagion between financial markets is of particular concern. In this paper, by adopting the Markov three-zone state transition model and the dynamic correlation coefficient model, the risk dynamic relationship between China's stock, national debt and exchange rate market volatility and various market risks during 2005-2018 is explored, which provides a reference for the measurement and supervision of systemic financial risks in China. The experimental results are as follows: 1. From the perspective of its own risk characteristics, the stock market has three states of low, medium and high volatility, and the high school risk duration is 4.2 times of the low risk duration. The bond market and the exchange rate market are in a state of low to medium volatility, the exchange rate market risk conversion is more frequent, and the risk duration is shorter. 2. In major financial risk events such as the financial crisis, market risks are different, but risk aversion is the main motivation. 3. For the exchange rate, the bond market has a more serious market segmentation, and a more independent regulatory policy can be adopted. There is a clear risk correlation between the stock market and the other two markets. It is necessary for regulators to consider and conduct systematic supervision on a global scale.
DCC Model; Dynamic Correlation; Market Segmentation