Risk Attribution Using the Shapley Value: Methodology and Policy Applications
Kostas Tsatsaronis () and
Claudio Borio ()
Review of Finance, 2016, vol. 20, issue 3, 1189-1213
We present the Shapley Value as a methodology for risk attribution and use it to derive measures of banks’ systemic importance. The methodology possesses attractive properties, such as fairness and efficiency. It also leads naturally to a framework for the analysis of different drivers of systemic importance: bank size, bank-specific risk, and the commonality of banks’ exposures. We prove that, all else equal, an increase in bank size leads to a more than proportional increase in systemic importance. We also show how alternative applications of the Shapley Value methodology can be used in designing policy tools with system-wide objectives.
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Persistent link: https://EconPapers.repec.org/RePEc:oup:revfin:v:20:y:2016:i:3:p:1189-1213.
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