A new method for measuring financial resilience

This paper proposes a new model to measure financial resilience from the perspective of external risk shocks, which composes of three submodels, namely, the dynamic factor model, the time-varying parameter vector autoregression (TVP-VAR) model, and the resilience characteristic measurement model with two dimensions: absorption intensity and absorption duration. At the theoretical level, we simulate and analyze the changing paths of financial resilience under different scenarios. At the empirical level, we apply the model to study the resilience of the UK financial market. The results indicate that the UK financial resilience fluctuations exhibit phased characteristics and there is a clear inverse relationship between absorption intensity and absorption duration. Notably, periods of low resilience often coincide with specific risk events.