Complex Network Construction of Internet Finance Risk
Internet Finance is an organic combination of financial industry and Internet information technology. Internet Finance, represented by mobile payment, online loans, crowdfunding and Internet investment, has developed vigorously and become a hot spot of financial innovation. The development of Internet Finance not only improves the efficiency of financial resource allocation and realizes the transformation of residents' savings into capital, but also has certain risk attributes, which have attracted the attention of regulatory authorities. For example, the current relevant laws and regulations still lag behind the innovation vitality of Internet Finance products. The failure of an Internet Finance platform causes frequent capital problems. Some large-scale Internet Finance platforms have gradually become the core of the Internet Finance system and have the majority of users. The impact of Internet Finance on the economy has an important impact on the robustness of the entire financial system and its ability to serve the real economy. Therefore, the development of Internet Finance puts forward higher requirements for financial supervision departments. How to further prevent and resolve Internet Finance risks while promoting the development of Internet Finance has become an important issue to be solved.
Internet Finance is a new financial model that applies Internet technology to payment, capital borrowing and lending and transaction processing. In order to study the internal risks, our recent paper, "Complex Network Construction of Internet Finance Risk", uses Internet Finance risk elements as the network node to construct the complex network of Internet Finance risk system. Different from the study of macroeconomic shocks and Finance institution data, the paper mainly adopts the perspective of complex systems to analyze the systematic risk of Internet Finance. By dividing the entire financial system into Internet Finance subnet, regulatory subnet and traditional financial subnet, the paper discusses the relationship between contagion among different risk factors, and concludes that risks are transmitted externally through the internal circulation of Internet Finance, thus discovering potential hidden dangers of systemic risks. The results show that the nodes around the center of the whole system are the main objects of financial risk contagion in the Internet Finance network. In addition, macro-prudential regulation plays a decisive role in the control of the Internet Finance system, and points out the reasons why the current regulatory measures are still limited. This paper summarizes a research model which is still in its infancy, hoping to open up new prospects and directions for us to understand the cascading behaviors of Internet Finance risks.
This paper synthesizes the research literature of different scholars, selects 90 representative risk factors of Internet Finance, and puts forward the risk contagion network model of Internet Finance with risk factors as nodes. Considering that Internet Finance is a complex system, for some hard to quantify the risk factors of the problem in the processing, the model has a more intuitive visual ability. It helps to combine the micro and macro, two angles to analyze risk contagion of systemic risk, provides a better basis for the implementation of regulation. In addition, the study of Internet Finance with the theory of complexity in science can become a new idea, new method and new approach, so as to achieve the unification of Internet Finance research on micro and macro levels, and to provide more powerful support for the supervision of modern Internet Finance and the detection of potential hidden dangers. The subsequent research can collect the transaction data of commercial Banks and Internet Finance enterprises for empirical analysis, so as to explore the contagion law of systemic risk.
Runjie Xu - Nanjing University of Aeronautics and Astronautics
Chuanmin Mi - Nanjing University of Aeronautics and Astronautics
Rafał Mierzwiak - Poznan University of Technology
RunYu Meng - University of Science and Technology of China