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Attributing systemic risk to individual institutions

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Author Info

  • Nikola Tarashev
  • Claudio Borio
  • Kostas Tsatsaronis

Abstract

An operational macroprudential approach to financial stability requires tools that attribute system-wide risk to individual institutions. Making use of constructs from game theory, we propose an attribution methodology that has a number of appealing features: it can be used in conjunction with popular risk measures, it provides measures of institutions’ systemic importance that add up exactly to the measure of system-wide risk and it easily accommodates uncertainty about the validity of the risk model. We apply this methodology to a number of constructed examples and illustrate the interactions between drivers of systemic importance: size, the institution’s risk profile and strength of exposures to common risk factors. We also demonstrate how the methodology can be used for the calibration of macroprudential capital rules.

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Bibliographic Info

Paper provided by Bank for International Settlements in its series BIS Working Papers with number 308.

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Length: 34 pages
Date of creation: May 2010
Date of revision:
Handle: RePEc:bis:biswps:308

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Related research

Keywords: Systemic importance; macroprudential approach; Shapley value;

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  1. Acharya, Viral V & Pedersen, Lasse H & Philippon, Thomas & Richardson, Matthew P, 2012. "Measuring Systemic Risk," CEPR Discussion Papers 8824, C.E.P.R. Discussion Papers.
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