Applied Mathematics & Information Sciences

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Banks are linked increasingly, one can adjust the capital surplus and deficiency, but also increases the risks of default between banks. The individual bank’s loss will be through a linkage effects to other banks. This effect can significantly increase the risk of banking industry. This paper, from the asset price transmission angle, elaborated the formation mechanism of bank systemic risk and calculated China’s banking systemic risk using the data of 2007-2011 of Chinese listed banks. The results show default correlations exist among asset price of inter banks and different types of banks have a crisis of infectious to the other banks but contagion degree is different.