Financial contagion and asset liquidation strategies

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45 Scopus citations

Abstract

This paper provides a framework for modeling the financial system with multiple illiquid assets during a crisis. This work generalizes the paper by Amini et al. (2016) by allowing for differing liquidation strategies. The main result is a proof of sufficient conditions for the existence of an equilibrium liquidation strategy with corresponding unique clearing payments and liquidation prices. An algorithm for computing the maximal clearing payments and prices is provided.

Original languageEnglish
Pages (from-to)109-114
Number of pages6
JournalOperations Research Letters
Volume45
Issue number2
DOIs
StatePublished - 1 Mar 2017

Keywords

  • Financial contagion
  • Financial network
  • Fire sales
  • Systemic risk

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