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Measurement And Internalization Of Systemic Risk In A Global Banking Network

Author

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  • XIAOBING FENG

    (College of Finance, Shanghai Institute of Foreign Trade, Shanghai 201620, P. R. China;
    Antai Management School and the Department of Mathematics, Shanghai Jiaotong University, Shanghai 200240, P. R. China)

  • HAIBO HU

    (School of Business, East China University of Science and Technology, Shanghai 200237, P. R. China)

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.

Suggested Citation

  • Xiaobing Feng & Haibo Hu, 2013. "Measurement And Internalization Of Systemic Risk In A Global Banking Network," International Journal of Modern Physics C (IJMPC), World Scientific Publishing Co. Pte. Ltd., vol. 24(01), pages 1-15.
    • Handle: RePEc:wsi:ijmpcx:v:24:y:2013:i:01:n:s0129183112500933
    DOI: 10.1142/S0129183112500933
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    References listed on IDEAS

    as
    1. De Bandt, Olivier & Hartmann, Philipp, 2000. "Systemic risk: A survey," Working Paper Series 35, European Central Bank.
    2. Philipp Hartmann & Stefan Straetmans & Casper de Vries, 2007. "Banking System Stability. A Cross-Atlantic Perspective," NBER Chapters, in: The Risks of Financial Institutions, pages 133-188, National Bureau of Economic Research, Inc.
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    Cited by:

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    2. Wang, Lei & Li, Shouwei & Chen, Tingqiang, 2019. "Investor behavior, information disclosure strategy and counterparty credit risk contagion," Chaos, Solitons & Fractals, Elsevier, vol. 119(C), pages 37-49.

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