The most fundamental form of systemic risk in modern financial networks is contagion. In this article we describe a homogeneous banking system (banks with identical preferences and the same size of total assets) with interconnectedness: banks own shares in each others' assets. Using these...

The most important rule to determine payments in real-life bankruptcy problems is the proportional rule. Many bankruptcy problems are characterized by network aspects and default may occur as a result of contagion. Indeed, in financial networks with defaulting agents, the values of the agents'...

We consider financial networks where agents are linked to each other via mutual liabilities. In case of bankruptcy, there are potentially many bankruptcy rules, ways to distribute the assets of a bankrupt agent over the other agents. One common approach is to first apply pairwise netting of...

We study bankruptcy problems in financial networks in the presence of general bankruptcy laws. The set of clearing payment matrices is shown to be a lattice, which guarantees the existence of a greatest and a least clearing payment. Multiplicity of clearing payment matrices is both a theoretical...