Related papers: Optimal Clearing Payments in a Financial Contagion…
This paper proposes a novel dynamical model for determining clearing payments in financial networks. We extend the classical Eisenberg-Noe model of financial contagion to multiple time periods, allowing financial operations to continue…
In this paper we study the implications of contingent payments on the clearing wealth in a network model of financial contagion. We consider an extension of the Eisenberg-Noe financial contagion model in which the nominal interbank…
We study financial networks where banks are connected through bilateral liabilities and may default when resources are insufficient to meet obligations. We consider both the standard proportional clearing model and a priority-proportional…
We study financial networks with debt contracts and credit default swaps between specific pairs of banks. Given such a financial system, we want to decide which of the banks are in default, and how much of their liabilities can these…
The current global financial system forms a highly interconnected network where a default in one of its nodes can propagate to many other nodes, causing a catastrophic avalanche effect. In this paper we consider the problem of reducing the…
A financial system is represented by a network, where nodes correspond to banks, and directed labeled edges correspond to debt contracts between banks. Once a payment schedule has been defined, where we assume that a bank cannot refuse a…
We study financial systems from a game-theoretic standpoint. A financial system is represented by a network, where nodes correspond to firms, and directed labeled edges correspond to debt contracts between them. The existence of cycles in…
In this paper we introduce a generalized extension of the Eisenberg-Noe model of financial contagion to allow for time dynamics of the interbank liabilities, including a dynamic examination of default risk. This framework separates the cash…
Modern financial networks are highly connected and result in complex interdependencies of the involved institutions. In the prominent Eisenberg-Noe model, a fundamental aspect is clearing -- to determine the amount of assets available to…
In this paper, we construct a decentralized clearing mechanism which endogenously and automatically provides a claims resolution procedure. This mechanism can be used to clear a network of obligations through blockchain. In particular, we…
Financial network games model payment incentives in the context of networked liabilities. In this paper, we advance the understanding of incentives in financial networks in two important directions: minimal clearing (arising, e.g., as a…
We study a model of clearing in an interbank network with crossholdings and default charges. Following the Eisenberg--Noe approach, we define the model via a set of natural financial regulations including those related with eventual default…
We consider financial networks, where banks are connected by contracts such as debts or credit default swaps. We study the clearing problem in these systems: we want to know which banks end up in a default, and what portion of their…
We analyze how interdependencies between organizations in financial networks can lead to multiple possible equilibrium outcomes. A multiplicity arises if and only if there exists a certain type of dependency cycle in the network that allows…
Much research in systemic risk is focused on default contagion. While this demands an understanding of valuation, fewer articles specifically deal with the existence, the uniqueness, and the computation of equilibrium prices in structural…
We develop a structural default model for interconnected financial institutions in a probabilistic framework. For all possible network structures we characterize the joint default distribution of the system using Bayesian network…
Financial networks model a set of financial institutions (firms) interconnected by obligations. Recent work has introduced to this model a class of obligations called credit default swaps, a certain kind of financial derivatives. The main…
In portfolio compression, market participants (banks, organizations, companies, financial agents) sign contracts, creating liabilities between each other, which increases the systemic risk. Large, dense markets commonly can be compressed by…
As impressively shown by the financial crisis in 2007/08, contagion effects in financial networks harbor a great threat for the stability of the entire system. Without sufficient capital requirements for banks and other financial…
The aim of this paper is to quantify and manage systemic risk caused by default contagion in the interbank market. We model the market as a random directed network, where the vertices represent financial institutions and the weighted edges…