Control of Dynamic Financial Networks (The Extended Version)
Giuseppe Calafiore,
Giulia Fracastoro,
Anton V. Proskurnikov
Abstract:The current global financial system forms a highly interconnected network where a default in one of its nodes can propagate to many other nodes, causing a catastrophic avalanche effect. In this paper we consider the problem of reducing the financial contagion by introducing some targeted interventions that can mitigate the cascaded failure effects. We consider a multi-step dynamic model of clearing payments and introduce an external control term that represents corrective cash injections made by a ruling autho… Show more
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