Benefit attribution in financial systems with bilateral netting

Hanah Lim

Finance Research Letters, 2022, vol. 45, issue C

Abstract: We develop a cooperative game model and apply the Shapley value to the game to attribute overall benefits of bilateral netting to individual financial institutions. We propose three different characteristic functions, each of which represents a different type of systemic importance. A simulation study shows that the benefit attribution of a bank is strongly related to the bank’s interbank reliance and vulnerability.

Keywords: Benefit attribution; Bilateral netting; Financial systemic loss; Cooperative game theory; Shapley value (search for similar items in EconPapers)
JEL-codes: C15 C61 C71 G11 G32 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:45:y:2022:i:c:s1544612321002518

DOI: 10.1016/j.frl.2021.102179

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