EconPapers    
Economics at your fingertips  
 

A Dynamic Default Contagion Model: From Eisenberg-Noe to the Mean Field

Zachary Feinstein and Andreas Sojmark

Papers from arXiv.org

Abstract: In this work we introduce a model of default contagion that combines the approaches of Eisenberg-Noe interbank networks and dynamic mean field interactions. The proposed contagion mechanism provides an endogenous rule for early defaults in a network of financial institutions. The main result is to demonstrate a mean field interaction that can be found as the limit of the finite bank system generated from a finite Eisenberg-Noe style network. In this way, we connect two previously disparate frameworks for systemic risk, and in turn we provide a bridge for exploiting recent advances in mean field analysis when modelling systemic risk. The mean field limit is shown to be well-posed and is identified as a certain conditional McKean-Vlasov type problem that respects the original network topology under suitable assumptions.

Date: 2019-12
New Economics Papers: this item is included in nep-ban, nep-net and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://arxiv.org/pdf/1912.08695 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1912.08695

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().

 
Page updated 2020-04-28
Handle: RePEc:arx:papers:1912.08695