An Innovative Approach to Analyze Financial Contagion Using Causality-Based Complex Network and Value at Risk

In this paper, we propose a new approach to analyze financial contagion using causality-based complex network and value-at-risk (VaR). We innovatively combine the use of VaR an expected shortfall (ES)-based causality with impulse response analysis discover features contagion. improve current research methods by building Granger on ES conclusions drawn from as foundational step before analysis. First all, select 30 stock indices that are very well-known globally collect their trading data. After calculating risk indicators ES, perform test them then build networks based respective square matrix. Next, examine networks’ topological different degrees transmission among all in system. Lastly, identify most least active conduct them. BSESN (India S&P BSE SENSEX) is risk-sensitive index its significantly increases 0.03–0.04% jumps even more, 0.07–0.08%, few key indices. also find either PSI20 or XU100 risk-proof index, depending whether choose indicator.