A lending scheme for a system of interconnected banks with probabilistic constraints of failure

@article{Cordoni2020ALS,
  title={A lending scheme for a system of interconnected banks with probabilistic constraints of failure},
  author={F. Cordoni and L. Persio and Luca Prezioso},
  journal={Autom.},
  year={2020},
  volume={120},
  pages={109111}
}
  • F. Cordoni, L. Persio, Luca Prezioso
  • Published 2020
  • Computer Science, Economics
  • Autom.
  • We derive a closed form solution for an optimal control problem related to an interbank lending schemes subject to terminal probability constraints on the failure of banks which are interconnected through a financial network. The derived solution applies to a real banks network by obtaining a general solution when the aforementioned probability constraints are assumed for all the banks. We also present a direct method to compute the systemic relevance parameter for each bank within the network. 
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