On the Indeterminacy of the Clearing Payment Vectors in Numerical Simulations on Financial Networks

Conference paper
Part of the Agent-Based Social Systems book series (ABSS, volume 11)

Abstract

This paper points out a methodological lacuna in the recent stream of numerical analyses of contagion in financial networks, and presents a solution to amend it. Under some conditions, the intercyclical obligations that connect the agents in a financial network cause the indeterminacy of the vector of payments that clears such obligations. This problem, first pointed out by Eisenberg and Noe (Manage Sci 47:236–249, 2001), has received little or no attention by authors who investigate payment flows and domino effects in networks using numerical simulations. Here we present an original result that establishes necessary and sufficient conditions for the uniqueness of the clearing payment vector for any financial network, and we demonstrate this result to control for the occurrence of the above-mentioned indeterminacy while performing numerical exercises on financial networks.

Keywords

Interbank network Numerical simulation Payment systems Social networks 

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Copyright information

© Springer Japan 2014

Authors and Affiliations

  1. 1.Dipartimento di Economia AziendaleUniversità ‘G. d’Annunzio’PescaraItaly

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