Peter Mitic1, Bertrand K. Hassani1, 2

(1. Santander, UK; 2. Universitė Paris 1 Panthėon-Sorbonne, France)

 

 

Abstract: The Shapley method is applied to capital allocation in the context of a simple business model, where many business units are supported by services. In this model the services are capable of either reducing the capital payable by the business units, or the opposite. A simple model of evaluating the value of coalitions is proposed, with a modification if a service is a member of the coalition. A closed form formula for the Shapley allocation to all players is derived, thus eliminating combinatorial problems.

 

 

Key words: allocation; shapley; operational risk; diversification; service; game theory; capital value

 

JEL code: C71