Dynamic monitoring of financial security risks: A novel China financial risk index and an early warning system

From the perspective of financial risk-a more macro level, this letter selected three levels of indicators which reflect emerging risks, synthesized seven dimensional indices, and developed a China financial risk index using two different methods, identifying the risk regime by Markov switching model. The convolution for neural network-long short-term memory model was used to construct an early warning system for financial risks. The model was optimized using regime-based prediction. The empirical results show that the composite dynamic monitoring system and the early warning system have good effects.