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Dynamic Clearing and Contagion in Financial Networks

Author
Tathagata Banerjee, Alex Bernstein, Zachary Feinstein
Date Updated
2022/11/23
Category
q-fin.MF
Date Published
2018/01/06
Date Retrieved
2022/11/23
Description
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.
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URL
https://arxiv.org/abs/1801.02091
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