Dynamic Clearing and Contagion in Financial Networks
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arXiv
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| Main Authors: | , , |
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| Format: | Preprint |
| Published: |
2018
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| _version_ | 1866913405745496064 |
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| author | Banerjee, Tathagata Bernstein, Alex Feinstein, Zachary |
| author_facet | Banerjee, Tathagata Bernstein, Alex Feinstein, Zachary |
| contents | 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 account and long-term capital account to more accurately model the health of a financial institution. In doing so, such a system allows us to distinguish between delinquency and default as well as between defaults resulting from either insolvency or illiquidity. |
| format | Preprint |
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arxiv_https___arxiv_org_abs_1801_02091 |
| institution | arXiv |
| publishDate | 2018 |
| record_format | arxiv |
| spellingShingle | Dynamic Clearing and Contagion in Financial Networks Banerjee, Tathagata Bernstein, Alex Feinstein, Zachary Mathematical Finance Risk Management 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 account and long-term capital account to more accurately model the health of a financial institution. In doing so, such a system allows us to distinguish between delinquency and default as well as between defaults resulting from either insolvency or illiquidity. |
| title | Dynamic Clearing and Contagion in Financial Networks |
| topic | Mathematical Finance Risk Management |
| url | https://arxiv.org/abs/1801.02091 |