Strategic default in financial networks

• 成果类型: Article
• 署名作者: Allouch, Nizar; Jalloul, Maya; Duncan, Alfred
• 署名单位: University of Kent; Lancaster University
• 刊物名称: GAMES AND ECONOMIC BEHAVIOR
• ISSN/ISSBN: 0899-8256
• DOI: 10.1016/j.geb.2023.10.001
• 发表日期: 2023
• 页码: 941-954
• 关键词: systemic risk; default; Financial networks; coordination games; Ear decomposition; Central clearing counterparty; Financial regulation

摘要

This paper investigates a model of default in financial networks where the decision by one agent on whether or not to default impacts the incentives of other agents to escape default. Agents' payoffs are determined by the clearing mechanism introduced in the seminal contribution of Eisenberg and Noe (2001). We first show the existence of a Nash equilibrium of this default game. Furthermore, we develop an algorithm to find all Nash equilibria and guide regulatory intervention that relies on the financial network structure. The algorithm provides a ranking for the set of Nash equilibria for specific financial network structures, which can serve as a measure of systemic risk. Finally, we show that introducing a central clearing counterparty achieves the efficient equilibrium at no additional cost.