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Systemic Risk In Financial Networks, Tathagata Banerjee

McKelvey School of Engineering Theses & Dissertations

In this dissertation, I have used the network model based approach to study systemic risk in financial networks. In particular, I have worked on generalized extensions of the Eisenberg--Noe [2001] framework to account for realistic financial situations viz. pricing of corporate debt while accounting for network effects, asset liquidation mechanisms during fire sales, dynamic clearing and impact of contingent payments such as insurance and credit default swaps. First, I present formulas for the valuation of debt and equity of firms in a financial network under comonotonic endowments. I demonstrate that the comonotonic setting provides a lower bound to the price …