A study of interconnections and contagion among Chinese financial institutions using a ΔCoVaR network

摘要

With the development of market economy, the interconnections among Chinese companies are becoming closer and the risk exposures are increasing. In this study, a tail risk network based on Delta CoVaR is constructed to access interconnectedness and contagion between Chinese financial institutions and explore the existence of community structures in the network. The results demonstrate that securities are closely linked to other industries and risk contagion within the industry is more serious for banks, insurers, and diversified financial institutions. The systemically important financial institutions are concentrated in the banking and insurance industries. In addition, there is an obvious community structure with industry characteristics in the Chinese financial system. The approach proposed herein can help regulators develop effective policies and investors disperse investment risks.

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