Uniqueness of equilibrium in a payment system with liquidation costs

Hamed Amini; Damir Filipović; Andreea Minca

doi:10.1016/j.orl.2015.10.005

Uniqueness of equilibrium in a payment system with liquidation costs

Hamed Amini, Damir Filipović, Andreea Minca

Mathematics

Research output: Contribution to journal › Article › peer-review

21 Scopus citations

Abstract

We study a financial network where forced liquidations of an illiquid asset have a negative impact on its price, thus reinforcing network contagion. We give conditions for uniqueness of the clearing asset price and liability payments. Our main result holds under mild and natural assumptions on the price impact function: monotonicity of the price impact function and strict monotonicity of the proceeds of liquidation in the liquidated quantity.

Original language	English (US)
Pages (from-to)	1-5
Number of pages	5
Journal	Operations Research Letters
Volume	44
Issue number	1
DOIs	https://doi.org/10.1016/j.orl.2015.10.005
State	Published - Jan 1 2016

Keywords

Asset price contagion
Eisenberg-Noe model
Financial network
Systemic risk

ASJC Scopus subject areas

Software
Management Science and Operations Research
Industrial and Manufacturing Engineering
Applied Mathematics

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10.1016/j.orl.2015.10.005

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AU - Filipović, Damir

AU - Minca, Andreea

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AB - We study a financial network where forced liquidations of an illiquid asset have a negative impact on its price, thus reinforcing network contagion. We give conditions for uniqueness of the clearing asset price and liability payments. Our main result holds under mild and natural assumptions on the price impact function: monotonicity of the price impact function and strict monotonicity of the proceeds of liquidation in the liquidated quantity.

KW - Asset price contagion

KW - Eisenberg-Noe model

KW - Financial network

KW - Systemic risk

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Uniqueness of equilibrium in a payment system with liquidation costs

Abstract

Keywords

ASJC Scopus subject areas

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