MEASUREMENT AND INTERNALIZATION OF SYSTEMIC RISK IN A GLOBAL BANKING NETWORK

Xiaobing Feng () and Haibo Hu
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Xiaobing Feng: College of Finance, Shanghai Institute of Foreign Trade, Shanghai 201620, P. R. China;
Haibo Hu: School of Business, East China University of Science and Technology, Shanghai 200237, P. R. China

International Journal of Modern Physics C (IJMPC), 2013, vol. 24, issue 01, 1-15

Abstract: The negative externalities from an individual bank failure to the whole system can be huge. One of the key purposes of bank regulation is to internalize the social costs of potential bank failures via capital charges. This study proposes a method to evaluate and allocate the systemic risk to different countries/regions using a Susceptible-Infected-Removable (SIR) type of epidemic spreading model and the Shapley value (SV) in game theory. The paper also explores features of a constructed bank network using real globe-wide banking data.

Keywords: Systemic risk; measurement; epidemic spreading model; complex system; SV; 89.65.-s; 89.75.Hc; 87.23.Ge (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (2)

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DOI: 10.1142/S0129183112500933

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