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Fuchun Li is a Senior Economist in the Model Development and Research Division of the Financial Stability Department at the Bank of Canada. His research interests are in econometric methods in finance, economics, and risk management. His current work mainly focuses on developing financial tools or financial stability assessment framework for the risk analysis of banking industry or Financial System. He received his PhD in economics from the University of Western Ontario.
We propose an early warning model for predicting the likelihood of a financial stress event for a given future time, and examine whether credit plays an important role in the model as a non-linear propagator of shocks.
We measure systemic risk in the network of financial market infrastructures (FMIs) as the probability that two or more FMIs have a large credit risk exposure to the same FMI participant.
The author proposes a test for the parametric specification of each component in the diffusion matrix of a d-dimensional diffusion process. Overall, d (d-1)/2 test statistics are constructed for the off-diagonal components, while d test statistics are constructed for the main diagonal components.
The objective of this paper is to propose an early warning system that can predict the likelihood of the occurrence of financial stress events within a given period of time. To achieve this goal, the signal extraction approach proposed by Kaminsky, Lizondo and Reinhart (1998) is used to monitor the evolution of a number of economic indicators that tend to exhibit an unusual behaviour in the periods preceding a financial stress event.
The authors use the Financial Stress Index created by the International Monetary Fund to predict the likelihood of financial stress events for five developed countries: Canada, France, Germany, the United Kingdom and the United States.
Testing for Financial Contagion Based on a Nonparametric measure of cross-market linkage, (with H. Zhu), Review of Financial Economics, 2014, Vol. 23, p. 141-147.
Identifying Asymmetric Comovements of International Stock Market Returns, Journal of Financial Econometrics, 2014, Vol. 12, No. 3, p. 507-554.
A Consistent Test for Multivariate Conditional Distributions, (with Greg Tkacz), Econometric Reviews, 30 (3), p. 251-273, 2011.
Testing the Parametric Specification of a Diffusion Function in a Diffusion Process Econometric Theory, 2007, 23, 221-250.
A Semiparametric Two-Factor Term Structure Model (with John Knight, Minwei Yuan), Journal of Financial Econometrics, 2006, 4 (2): 204-237.
Combining Forecasts with Nonparametric Kernel Regressions (with Greg Tkacz), Studies in Nonlinear Dynamics & Econometrics, 2004, 8 (4), article 2.
An Empirical Implementation of a Non-parametric Estimation Approach for a Two-Factor Term Structure Model (with Mingwei Yuan), Canadian Journal of Administrative Sciences, 2000, 17 (2), 182-198.
A Consistent Bootstrap Test for Conditional Density Functions with Time-Series Data, (with Greg Tkacz), Journal of Econometrics, 2006, Vol. 133, 863-886.