Approximate clearing in financial networks with credit default swaps: hardness thresholds, a box algorithm, barriers, and exact solvency at bounded degree

Michal \v{C}ert\'ik

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Abstract: We study approximate clearing in financial networks with credit default swaps. For weak notions (W) and (I), we prove PPAD-hardness below a threshold approximately $0.2530$ and give a polynomial-time interval algorithm above a threshold approximately $0.2834$. On networks whose CDS writers are solvent ex ante, the corresponding bounds are $(13-\sqrt{153})/4$ and $3-2\sqrt{2}$, approximately $0.1577$ and $0.1716$. The thresholds are sharp for bounded-radius algorithms: for (I) on writer-solvent networks, and for (I) and (W) in general. On non-degenerate networks, (W) and (I) have identical hardness and tractability threshold endpoints. For exact-solvency notion (D), PPAD-hardness holds at every rational error $\varepsilon

Date: 2026-10
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