Mean Field Games and Systemic Risk

@article{Carmona2013MeanFG,
  title={Mean Field Games and Systemic Risk},
  author={Ren{\'e} A. Carmona and Jean-Pierre Fouque and Li-Hsien Sun},
  journal={ERN: Other Game Theory \& Bargaining Theory (Topic)},
  year={2013}
}
We propose a simple model of inter-bank borrowing and lending where the evolution of the log-monetary reserves of $N$ banks is described by a system of diffusion processes coupled through their drifts in such a way that stability of the system depends on the rate of inter-bank borrowing and lending. Systemic risk is characterized by a large number of banks reaching a default threshold by a given time horizon. Our model incorporates a game feature where each bank controls its rate of borrowing… Expand
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We propose a simple model of the banking system and analyze stochastic stability of inter-bank lending. The monetary reserves of banks are modeled as a system of interacting Feller diffusions. TheExpand
Stability in a Model of Interbank Lending
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