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Measuring Systemic Risk Of China'S Listed Banks

Author

Listed:
  • ZHANG, Ping

    (Department of Financial Engineering, School of Finance, Capital University of Economics and Business, Beijing, China)

  • WANG, Yiru

    (School of Finance, Capital University of Economics and Business, Beijing, China)

  • ZHAO, Min

    (Department of Financial Engineering, School of Finance, Capital University of Economics and Business, Beijing, China)

  • YANG, Tzu-Yi

    (Department of Foreign Languages and Literature National Ilan University, Taiwan)

Abstract

After the financial crisis in 2008, the world became more aware of the importance of the systemic risk. Within China’s financial system, commercial banks have a dominant position. Therefore, the study of systemic risk of the banking industry in China has an important and real meaning. The present paper was based on the weekly return of 16 listed banks in China from 2010 to 2018. The quantile regression method and the GARCH model were applied to measure the systemic risk of banks in China. The VaR and CoVaR showed that the risk of large commercial banks in China was generally low but was usually higher than the medium and small banks. Comparing the quantile regression method and the GARCH model method indicated that both approaches could effectively measure the systemic risk of listed banks in China. The %CoVAR calculated by the GARCH model was significantly smaller than the result from the quantile regression method. Compared with the DCC-GARCH model, a simple GARCH model might underestimate the systemic risk of banks.

Suggested Citation

  • ZHANG, Ping & WANG, Yiru & ZHAO, Min & YANG, Tzu-Yi, 2021. "Measuring Systemic Risk Of China'S Listed Banks," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 25(3), pages 6-28, September.
    • Handle: RePEc:vls:finstu:v:25:y:2021:i:3:p:6-28
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    More about this item

    Keywords

    systemic risk; CoVaR; quantile regression method; GARCH model method; DCC-GARCH Pages: 6-28;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G00 - Financial Economics - - General - - - General

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