Related papers: Bailouts in Financial Networks
We consider the problem of determining a sequence of payments among a set of entities that clear (if possible) the liabilities among them. We formulate this as an optimal control problem, which is convex when the objective function is, and…
This paper considers the problem faced by a bank which trades in the funds market so as to maintain the reserve requirements and minimize the costs of doing that. We work in a stochastic paradigm and the reserve requirements are determined…
The debts' clearing problem is about clearing all the debts in a group of $n$ entities (e.g. persons, companies) using a minimal number of money transaction operations. In our previous works we studied the problem, gave a dynamic…
We study computational problems in financial networks of banks connected by debt contracts and credit default swaps (CDSs). A main problem is to determine \emph{clearing} payments, for instance right after some banks have been exposed to a…
The interdependency between different network layers is commonly observed in Cyber Physical Systems and communication networks adopting the dissociation of logic and hardware implementation, such as Software Defined Networking and Network…
We consider a model of debt management, where a sovereign state trade some bonds to service the debt with a pool of risk-neutral competitive foreign investors. At each time, the government decides which fraction of the gross domestic…
We test the hypothesis that interconnections across financial institutions can be explained by a diversification motive. This idea stems from the empirical evidence of the existence of long-term exposures that cannot be explained by a…
The question of how to stabilize financial systems has attracted considerable attention since the global financial crisis of 2007-2009. Recently, Beale et al. ("Individual versus systemic risk and the regulator's dilemma", Proc Natl Acad…
We develop a model of bailout stigma where accepting a bailout signals a firm's balance-sheet weakness and worsens its funding prospect. To avoid stigma, high-quality firms either withdraw from subsequent financing after receiving bailouts…
We study a market of investments on networks, where each agent (vertex) can invest in any enterprise linked to her, and at the same time, raise capital for her firm's enterprise from other agents she is linked to. Failing to raise…
Payment channels allow transactions between participants of the blockchain to be executed securely off-chain, and thus provide a promising solution for the scalability problem of popular blockchains. We study the online network design…
Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk…
Management of systemic risk in financial markets is traditionally associated with setting (higher) capital requirements for market participants. There are indications that while equity ratios have been increased massively since the…
I develop a tractable adverse-selection model comparing secured bank loans and bonds when both pledge collateral but differ in effective liquidation efficiency. A small wedge in recovery rates generates coexistence, a sharp bank-bond…
The global financial system can be represented as a large complex network in which banks, hedge funds and other financial institutions are interconnected to each other through visible and invisible financial linkages. Recently, a lot of…
We propose a new model of the liquidity driven banking system focusing on overnight interbank loans. This significant branch of the interbank market is commonly neglected in the banking system modeling and systemic risk analysis. We…
We undertake a fundamental study of network equilibria modeled as solutions of fixed point equations for monotone linear functions with saturation nonlinearities. The considered model extends one originally proposed to study systemic risk…
Ensuring the security of networked systems is a significant problem, considering the susceptibility of modern infrastructures and technologies to adversarial interference. A central component of this problem is how defensive resources…
It is shown that optimal network plans can be obtained, naturally, as a limit of easier problems of point allocations. These problems are obtained by minimizing the mass transportation on the set of atomic measures of prescribed number of…
We consider the problem of governing systemic risk in an assets-liabilities dynamical model of banking system. In the model considered each bank is represented by its assets and its liabilities.The capital reserves of a bank are the…