Attributing Systemic Risk to Individual Institutions

29 Pages Posted: 28 Jun 2010 Last revised: 3 Nov 2013

See all articles by Nikola A. Tarashev

Nikola A. Tarashev

Bank for International Settlements (BIS) - Monetary and Economic Department

Claudio E. V. Borio

Bank for International Settlements (BIS) - Research and Policy Analysis

Kostas Tsatsaronis

Bank for International Settlements (BIS) - Monetary and Economic Department

Date Written: May 2010

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.

Keywords: Systemic Importance, Macroprudential Approach, Shapley Value

JEL Classification: C15, C71, G20, G28

Suggested Citation

Tarashev, Nikola A. and Borio, Claudio E.V. and Tsatsaronis, Konstantinos, Attributing Systemic Risk to Individual Institutions (May 2010). BIS Working Paper No. 308, Available at SSRN: https://ssrn.com/abstract=1631761 or http://dx.doi.org/10.2139/ssrn.1631761

Nikola A. Tarashev

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Claudio E.V. Borio (Contact Author)

Bank for International Settlements (BIS) - Research and Policy Analysis ( email )

CH-4002 Basel, Basel-Stadt
Switzerland

Konstantinos Tsatsaronis

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland
(41 61) 280 8082 (Phone)
(41 61) 280 9100 (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
1,708
Abstract Views
6,016
Rank
19,105
PlumX Metrics