Dual representations for systemic risk measures (Q2299390)

The article is a relatively comprehensive overview of the important topics -- representation and economic interpretations of some recently proposed measures of systemic risk from convex duality point of view. This paper provides dual representation results for the systemic risk measures \(R^{\mathrm{ins}}\) and \(R^{\mathrm{sen}}\) \[ R^{\mathrm{ins}}(X)=\left\{z\in R^d |\Lambda (X)+\sum_{i=1}^dz_i\in A\right\} \] \[ R^{\mathrm{sen}}(X)=\{z\in R^d |\Lambda (X+z)\in A\} \] as well as for their scalarizations \(\rho^{\mathrm{ins}}\) and \(\rho^{\mathrm{sen}}\) \[ \rho^{\mathrm{ins}}(X)=\rho (\Lambda (X))=\inf \{k\in R |\Lambda (X)+k\in A\} \] \[ \rho^{\mathrm{sen}}(X)=\inf\left\{\sum_{i=1}^d z_i |\Lambda (X+z)\in A\right\} \] in terms of three types of dual variables: probability measures for each of the financial institutions, weights for each of the financial institutions, and probability measures for society. The probability measures can be interpreted as possible models governing the dynamics of the institutions/society. The main results of the paper are collected in Theorem 3.2 followed by some comments on the economic interpretation of these results. The form of the dual representations under some canonical aggregation functions, including that of the Eisenberg-Noe model, are investigated in Section 4. A model uncertainty representation of the sensitive systemic risk measure is discussed in Section 5.