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Systemic risk components in a network model of contagion

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journal contribution
posted on 2016-03-16, 17:50 authored by Jeremy Staum, Mingbin Feng, Ming Liu

We show how to perform a systemic risk attribution in a network model of contagion with interlocking balance sheets, using the Shapley and Aumann–Shapley values. Along the way, we establish new results on the sensitivity analysis of the Eisenberg–Noe network model of contagion, featuring a Markov chain interpretation. We illustrate the design process for systemic risk attribution methods by developing several examples.