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An Axiomatic Viewpoint on the Rogers--Veraart and Suzuki--Elsinger Models of Systemic Risk

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  • Yuri Kabanov
  • Arthur Sidorenko

Abstract

We study a model of clearing in an interbank network with crossholdings and default charges. Following the Eisenberg--Noe approach, we define the model via a set of natural financial regulations including those related with eventual default charges and derive a finite family of fixpoint problems. These problems are parameterized by vectors of binary variables. Our model combines features of the Ararat--Meimanjanov, Rogers--Veraart, and Suzuki--Elsinger networks. We develop methods of computing the maximal and minimal clearing pairs using the mixed integer-linear programming and a Gaussian elimination algorithm.

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  • Yuri Kabanov & Arthur Sidorenko, 2022. "An Axiomatic Viewpoint on the Rogers--Veraart and Suzuki--Elsinger Models of Systemic Risk," Papers 2212.13188, arXiv.org.
    • Handle: RePEc:arx:papers:2212.13188
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    References listed on IDEAS

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    1. Zachary Feinstein & Andreas Sojmark, 2019. "A Dynamic Default Contagion Model: From Eisenberg-Noe to the Mean Field," Papers 1912.08695, arXiv.org.
    2. L. C. G. Rogers & L. A. M. Veraart, 2013. "Failure and Rescue in an Interbank Network," Management Science, INFORMS, vol. 59(4), pages 882-898, April.
    3. Larry Eisenberg & Thomas H. Noe, 2001. "Systemic Risk in Financial Systems," Management Science, INFORMS, vol. 47(2), pages 236-249, February.
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