Topic: Circuit Breakers and Contagion
Speaker: SHUFE (曾旭东), Shanghai University of Finance and Economics
Time: Thursday, December 6, 14:00-15:00
Place: Room K02, Guanghua Building 2
Circuit breakers based on indices are commonly imposed in financial markets to prevent market crashes and reduce volatility in bad times. We develop a continuous-time equilibrium model with multiple stocks to study how circuit breakers affect joint stock price dynamics, cross-stock contagion, and market volatility. Contrary to the regulatory goals and consistent with what happened in recent Chinese markets, we show that in bad times, circuit breakers can cause crash/volatility contagion and high correlations among otherwise independent stocks, can significantly increase market volatility, and can accelerate market decline. We propose an alternative circuit breaker approach that does not cause either correlation or any contagion.(Joint work with Hong Liu at WUSTL)
Zeng is Associate Professor at School of Finance, and Professor (special term) at Institute of Scientific Computation and Financial Data Analysis, Shanghai University of Finance and Economics. He obtained Ph.D. in Applied Mathematics at the University of Southern California. His research centers around Asset Pricing, Portfolio Choice, Risk Management, and Mathematical Finance, and papers have been published in Quantitative Finance, Journal of Applied Probability, Mathematics of Operations Research, etc.
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