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Evaluating financial contagion through Ricci curvature on multivariate reactive point processes

Author

Listed:
  • Jiang, Haotong
  • Zhao, Mingen
  • Zhang, Zirui
  • Luo, Tianyuan

Abstract

Financial asset prices are complexly interconnected, posing a challenge in developing effective indicators for contagion. We establish a network structure among financial entities using a multivariate reactive point process. We propose the Ricci curvature of the general point process to measure changes in risk connectivity. A more negative overall curvature indicates higher risk connectivity among entities, reflecting the likelihood of systemic financial risk. In predicting systemic financial, empirical analysis demonstrates that our approach outperforms risk traditional indicators: CATFIN and absorption ratio. During non-alert periods of our indicator, return rates exhibit higher concentration, higher average returns, and left skewness.

Suggested Citation

  • Jiang, Haotong & Zhao, Mingen & Zhang, Zirui & Luo, Tianyuan, 2023. "Evaluating financial contagion through Ricci curvature on multivariate reactive point processes," Finance Research Letters, Elsevier, vol. 58(PA).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323006207
    DOI: 10.1016/j.frl.2023.104248
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