Analysis of Financial Crisis: A Perspective Based on Catastrophe Theory

Based on the theory of complex system brittleness, this paper focuses on analyzing the causes of financial system´s brittleness and holds the idea that the outbreak of brittleness is the root cause of financial crisis. By analyzing the financial brittleness potential function model and studying the brittleness critical points on which catastrophe of the financial system was triggered in quantitative methods, we get the conclusion that through controlling these critical points we can achieve the goal of forecasting the financial crisis. Finally, we take cusp catastrophe model for example to analyze sub-loan crisis and use catastrophe progression method to evaluate the brittleness of financial system.