Dynamic Clearing and Contagion in Financial Networks

Tathagata Banerjee, Alex Bernstein and Zachary Feinstein

Papers from arXiv.org

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.

Date: 2018-01, Revised 2024-06
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1801.02091

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