Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/144701
Authors: 
Csóka, Péter
Herings, P.Jean-Jacques
Year of Publication: 
2016
Series/Report no.: 
IEHAS Discussion Papers MT-DP - 2016/3
Abstract: 
We consider a situation in which agents have mutual claims on each other, summarized in a liability matrix. Agents' assets might be insufficient to satisfy their liabilities leading to defaults. We assume the primitives to be denoted in some unit of account. In case of default, bankruptcy rules are used to specify the way agents are going to be rationed. We present a convenient representation of bankruptcy rules. A clearing payment matrix is a payment matrix consistent with the prevailing bankruptcy rules that satisfies limited liability and priority of creditors. Both clearing payment matrices and the corresponding values of equity are not uniquely determined. We provide bounds on the possible levels equity can take. We analyze decentralized clearing processes and show the convergence of any such process in finitely many steps to the least clearing payment matrix. When the unit of account is sufficiently small, all decentralized clearing processes lead essentially to the same value of equity as a centralized clearing procedure. As a policy implication, it is not necessary to collect and process all the sensitive data of all the agents simultaneously and run a centralized clearing procedure.
Subjects: 
Networks
Bankruptcy Problems
Systemic Risk
Decentralized Clearing
Indivisibilities
JEL: 
C71
G10
ISBN: 
978-615-5594-29-8
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.