We consider a stylized core-periphery financial network in which links lead to the creation of projects in the outside economy but make banks prone to contagion risk. The controller seeks to maximize, under budget constraints, the value of the financial system defined as the total amount of...

We study optimal equity infusions into a financial system represented as a hierarchical network with two classes of banks, prone to both the risk of insolvencies and the risk of runs by short term creditors. The government seeks to minimize, under budget constraints, the magnitude of the total...