Uniqueness of equilibrium in a payment system with liquidation costs

Leo Hamed Amini, Damir Filipović, Andreea Minca

Research output: Contribution to journalArticle

10 Citations (Scopus)

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 languageEnglish (US)
Pages (from-to)1-5
Number of pages5
JournalOperations Research Letters
Volume44
Issue number1
DOIs
StatePublished - Jan 1 2016

Fingerprint

Uniqueness
Costs
Monotonicity
Contagion
Price impact
Payment system
Liquidation costs
Liquidation
Liability
Financial networks
Asset prices
Assets
Payment

Keywords

  • Asset price contagion
  • Eisenberg-Noe model
  • Financial network
  • Systemic risk

ASJC Scopus subject areas

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

Cite this

Uniqueness of equilibrium in a payment system with liquidation costs. / Amini, Leo Hamed; Filipović, Damir; Minca, Andreea.

In: Operations Research Letters, Vol. 44, No. 1, 01.01.2016, p. 1-5.

Research output: Contribution to journalArticle

Amini, Leo Hamed ; Filipović, Damir ; Minca, Andreea. / Uniqueness of equilibrium in a payment system with liquidation costs. In: Operations Research Letters. 2016 ; Vol. 44, No. 1. pp. 1-5.
@article{909d1eaefcf54bd3bafa2d634a8ce761,
title = "Uniqueness of equilibrium in a payment system with liquidation costs",
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.",
keywords = "Asset price contagion, Eisenberg-Noe model, Financial network, Systemic risk",
author = "Amini, {Leo Hamed} and Damir Filipović and Andreea Minca",
year = "2016",
month = "1",
day = "1",
doi = "10.1016/j.orl.2015.10.005",
language = "English (US)",
volume = "44",
pages = "1--5",
journal = "Operations Research Letters",
issn = "0167-6377",
publisher = "Elsevier",
number = "1",

}

TY - JOUR

T1 - Uniqueness of equilibrium in a payment system with liquidation costs

AU - Amini, Leo Hamed

AU - Filipović, Damir

AU - Minca, Andreea

PY - 2016/1/1

Y1 - 2016/1/1

N2 - 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.

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

UR - http://www.scopus.com/inward/record.url?scp=84947704864&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84947704864&partnerID=8YFLogxK

U2 - 10.1016/j.orl.2015.10.005

DO - 10.1016/j.orl.2015.10.005

M3 - Article

AN - SCOPUS:84947704864

VL - 44

SP - 1

EP - 5

JO - Operations Research Letters

JF - Operations Research Letters

SN - 0167-6377

IS - 1

ER -