Sovereign Adaptive Risk Modeling and Implications on the Eurozone GREXIT Case

In the wake of the 2008 financial crisis, the Financial Stability Board (FSB) and the Basel Committee on Banking Supervision (BCBS) created a list of Systemically Important Financial Institutions (SIFIs) with the intention of determining which financial institutions were important enough to the global market that their failure would result in systemic collapse. In this work we create a model that modifies the BCBS's five indicators of size, interconnectedness, cross-jurisdictional activities, complexity, and substitutability and applies these measures of systemic stress to governments. The original application of the model is to track the systemic interdependence of the Eurozone, with particular emphasis on the case of Greece. We anticipate this model can be used in regional fiscal situations beyond the Eurozone.