Construction of the China financial pressure index measurement model based under the AHP-EWM-TOPSIS model

Abstract

With the complexity of the internal structure of the financial market, systemic financial risks occur frequently. The cross cycle of the real economy and the financial system makes the bad problems in the economic development enter into the financial system with the transmission mechanism, thus leading to the reduction of the macroeconomic stability. Therefore, the foundation for preventing systemic financial risks and economic crises in the financial market is the accurate detection of pertinent potential threats. Based on relevant literature, combined with the characteristics of China’s financial system, this paper selects indicators from four dominant markets: banking market, stock market, bond market and foreign exchange market. Analytic hierarchy process (AHP) and entropy weight method (EWM) are used to calculate the relevant weights of each index, and the AHP-EWM coupling weight is calculated based on the Lagrange multiplier method. Then, the coupling weight of each index is substituted into the TOPSIS model to measure the comprehensive influence degree of multi-evaluation objects, and the pressure threshold and abnormal risk situation of China’s financial market are analyzed accordingly, so as to realize the construction of CFSI measurement model.The results show that:(1)The fluctuation of CFSI over the years is within the controllable range of 0.2~0.5, with few serious outliers;(2)The whole trend has a development trend to the medium and low regions, accompanied by the characteristics of rapid fluctuation and smaller amplitude;(3)The high-risk time zone identified by the model presents a strong inertial effect, with a large fluctuation span and a long duration;(4)The stability of financial pressure in the low-risk area is stronger than in the-high risk area, and it can quickly recover to the stable stage and develop towards the trend of low pressure.