Author(s)

Yijiao Fan ¹

Affiliation(s)

¹ JP Morgan, 4310 Crescent St, Apt 2713, Long Island City, New York, 11101, USA

Corresponding Author

Yijiao Fan

ABSTRACT

Using daily data from September 26, 2007 to July 13, 2023, this paper uses DCC-GARCH model and generalized variance decomposition network model to analyze the systemic risk spillover effects of fintech on banking, securities and insurance industries. The study quantifies the systemic risk impact of fintech on the traditional financial industry by calculating VaR (value at risk) and ΔCoVaR (change in conditional value at risk). The results show that while the risk of fintech has decreased after P2P lending has been phased out, it has increased during the COVID-19 pandemic. Fintech has the greatest risk spillover to the securities industry and the least impact on the banking industry. In addition, the correlation between fintech and various financial sectors increased significantly during the pandemic, indicating its high systemic importance. Based on these findings, this paper puts forward policy recommendations to strengthen risk monitoring and supervision, emphasizing the construction of a sound regulatory network for systemic risk contagion, real-time monitoring, and timely response to potential crises.

KEYWORDS

Financial Technology, DCC-GARCH Model, Generalized Variance Decomposition Network Model, Systemic Risk, Value at Risk, Conditional Value at Risk Change

CITE THIS PAPER

Yijiao Fan, Research on Risk Spillover Measurement of Fintech System Based on DCC-GARCH and Generalized Variance Decomposition Network Model. Financial Engineering and Risk Management (2024) Vol. 7: 43-50. DOI: http://dx.doi.org/10.23977/ferm.2024.070506.

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