Privacy-Preserving Methods for Sharing Financial Risk Exposures
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Lo_Privacy-preserving.pdf
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Author(s)
Abbe, Emmanuel A.
Khandani, Amir Ehsan
Lo, Andrew W.
Date Issued
May 2012
Journal
American Economic Review
Publisher
American Economic Association
Citation
Abbe, Emmanuel A., Amir E. Khandani, and Andrew W. Lo. "Privacy-Preserving Methods for Sharing Financial Risk Exposures." American Economic Review, 102(3): 65-70 (2012).
Version
Original manuscript
Abstract
The financial industry relies on trade secrecy to protect its business processes and methods, which can obscure critical financial risk exposures from regulators and the public. Using results from cryptography, we develop computationally tractable protocols for sharing and aggregating such risk exposures that protect the privacy of all parties involved, without the need for trusted third parties. Financial institutions can share aggregate statistics such as Herfindahl indexes, variances, and correlations without revealing proprietary data. Potential applications include: privacy-preserving real-time indexes of bank capital and leverage ratios; monitoring delegated portfolio investments; financial audits; and public indexes of proprietary trading strategies.
MIT Department
Sloan School of Management
Sloan School of Management. Laboratory for Financial Engineering
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
https://doi.org/10.1257/aer.102.3.65
