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Dynamic monitoring of financial security risks: A novel China financial risk index and an early warning system

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  • Zhang, Wenyu

Abstract

From the perspective of financial risk–a more macro level, this letter selected three levels of indicators which reflect emerging risks, synthesized seven dimensional indices, and developed a China financial risk index using two different methods, identifying the risk regime by Markov switching model. The convolution for neural network–long short-term memory model was used to construct an early warning system for financial risks. The model was optimized using regime-based prediction. The empirical results show that the composite dynamic monitoring system and the early warning system have good effects.

Suggested Citation

  • Zhang, Wenyu, 2024. "Dynamic monitoring of financial security risks: A novel China financial risk index and an early warning system," Economics Letters, Elsevier, vol. 234(C).
    • Handle: RePEc:eee:ecolet:v:234:y:2024:i:c:s0165176523004718
    DOI: 10.1016/j.econlet.2023.111445
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    References listed on IDEAS

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    5. Illing, Mark & Liu, Ying, 2006. "Measuring financial stress in a developed country: An application to Canada," Journal of Financial Stability, Elsevier, vol. 2(3), pages 243-265, October.
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    Cited by:

    1. Yu Chao & Nur Fazidah Elias & Yazrina Yahya & Ruzzakiah Jenal, 2025. "Research on Dynamic Hyperparameter Optimization Algorithm for University Financial Risk Early Warning Based on Multi-Objective Bayesian Optimization," Forecasting, MDPI, vol. 7(4), pages 1-23, October.

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    Keywords

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    JEL classification:

    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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