Systemic risk measures aggregate the risks from multiple financial institutions to find system-wide capital requirements. Though much attention has been given to assessing the level of systemic risk, less has been given to allocating that risk to the constituent institutions. Within this talk, we propose a Nash allocation rule that is inspired by game theory. Intuitively, to construct these capital allocations, the banks compete in a game to reduce their own capital requirements while, simultaneously, maintaining system-level acceptability. Sufficient conditions for existence and uniqueness of these Nash allocations are provided with applications provided for the prominent structures used for systemic risk measures in the literature. We demonstrate the efficacy of these Nash allocations with numerical case studies.
This talk is free and open to all interested participants.
Location: Leibniz Universität Hannover, Welfengarten 1, 30167 Hannover, Room 1101 – F442.
The start time is scheduled for 11:30 am.
Speaker: Professor Zachary Feinstein, PhD, Stevens Institute of Technology