In this talk we start by introducing a simple model for interbank default contagion in the vein of the seminal network models of Eisenberg--Noe (2001) and Rogers--Veraart (2013). The key feature, and main novelty, consists in combining stochastic dynamics with a simple but realistic balance sheet methodology for determining early defaults together with a Gai--Kapadia (2010) style contagion mechanism. After first developing the model for a finite number of banks, we present a natural way of passing to the mean field limit such that the network structure for interbank obligations is respected in a meaningful way. Thus, we provide a clear connection between the more classical network-based literature on systemic risk and the emerging literature on mean-field models more rooted in stochastic analysis.
Link to the personal website of Andreas Sojmark
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