Dynamic Clearing and Contagion in Financial Networks
Abstract
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.
- Publication:
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arXiv e-prints
- Pub Date:
- January 2018
- DOI:
- 10.48550/arXiv.1801.02091
- arXiv:
- arXiv:1801.02091
- Bibcode:
- 2018arXiv180102091B
- Keywords:
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- Quantitative Finance - Mathematical Finance;
- Quantitative Finance - Risk Management