Systemic risk across sectors; Are banks different?

This research compares systemic risk in the banking sector, the insurance sector, the construction sector, and the food sector. To measure systemic risk, we use extreme negative returns in stock market data for a time-varying panel of the 20 largest U.S. firms in each sector. We find that systemic risk is significantly larger in the banking sector relative to the other three sectors. This result is robust to separating out correlations with an economy-wide stock market index. For the non-banking sectors, the ordering from high to low systemic risk is: insurance sector, construction sector, and food sector. The difference between the insurance sector and the construction sector is no longer significant after correcting for correlations with the economy as a whole. The correction has a large effect for the banking sector and the insurance sector, and a smaller effect for the other two sectors.

A Note on the Shapley Value for Characteristic Functions on Bipartitions

We consider a cooperative game with a bipartition that indicates which players are participating. This paper provides an analytical solution for the Shapley value when the worth of a coalition only depends on the number of participating coalition players. The computational complexity grows linearly in the number of players, which contrasts with the usual exponential increase. Our result remains true when we introduce (i) randomization of the bipartition, and (ii) randomly draw a characteristic function

Essays on Systemic Risk: An analysis from multiple perspectives

This thesis is about systemic risk in the financial sector. It considers several aspects of systemic risk. It is a building block for an analysis of the impact of systemic risk on the real economy. It appears that stocks in the financial industry show a strong interdependence compared to stocks in other industries. This applies to both European and US equities. The strong interdependence suggests a major systemic risk for financials. At the same time, it is generally accepted that regulators will implicitly or explicitly step in to prevent a systemic crisis in the financial industry. Markets anticipate this warranty by accepting a lower return on financial stocks