1 Search Results for "Battiston, Stefano"


Document
Finding Clearing Payments in Financial Networks with Credit Default Swaps is PPAD-complete

Authors: Steffen Schuldenzucker, Sven Seuken, and Stefano Battiston

Published in: LIPIcs, Volume 67, 8th Innovations in Theoretical Computer Science Conference (ITCS 2017)


Abstract
We consider the problem of clearing a system of interconnected banks that have been exposed to a shock on their assets. Eisenberg and Noe (2001) showed that when banks can only enter into simple debt contracts with each other, then a clearing vector of payments can be computed in polynomial time. In this paper, we show that the situation changes radically when banks can also enter into credit default swaps (CDSs), i.e., financial derivative contracts that depend on the default of another bank. We prove that computing an approximate solution to the clearing problem with sufficiently small constant error is PPAD-complete. To do this, we demonstrate how financial networks with debt and CDSs can encode arithmetic operations such as addition and multiplication. Our results have practical impact for network stress tests and reveal computational complexity as a new concern regarding the stability of the financial system.

Cite as

Steffen Schuldenzucker, Sven Seuken, and Stefano Battiston. Finding Clearing Payments in Financial Networks with Credit Default Swaps is PPAD-complete. In 8th Innovations in Theoretical Computer Science Conference (ITCS 2017). Leibniz International Proceedings in Informatics (LIPIcs), Volume 67, pp. 32:1-32:20, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2017)


Copy BibTex To Clipboard

@InProceedings{schuldenzucker_et_al:LIPIcs.ITCS.2017.32,
  author =	{Schuldenzucker, Steffen and Seuken, Sven and Battiston, Stefano},
  title =	{{Finding Clearing Payments in Financial Networks with Credit Default Swaps is PPAD-complete}},
  booktitle =	{8th Innovations in Theoretical Computer Science Conference (ITCS 2017)},
  pages =	{32:1--32:20},
  series =	{Leibniz International Proceedings in Informatics (LIPIcs)},
  ISBN =	{978-3-95977-029-3},
  ISSN =	{1868-8969},
  year =	{2017},
  volume =	{67},
  editor =	{Papadimitriou, Christos H.},
  publisher =	{Schloss Dagstuhl -- Leibniz-Zentrum f{\"u}r Informatik},
  address =	{Dagstuhl, Germany},
  URL =		{https://drops-dev.dagstuhl.de/entities/document/10.4230/LIPIcs.ITCS.2017.32},
  URN =		{urn:nbn:de:0030-drops-81558},
  doi =		{10.4230/LIPIcs.ITCS.2017.32},
  annote =	{Keywords: Financial Networks, Credit Default Swaps, Clearing Systems, Arithmetic Circuits, PPAD}
}
  • Refine by Author
  • 1 Battiston, Stefano
  • 1 Schuldenzucker, Steffen
  • 1 Seuken, Sven

  • Refine by Classification

  • Refine by Keyword
  • 1 Arithmetic Circuits
  • 1 Clearing Systems
  • 1 Credit Default Swaps
  • 1 Financial Networks
  • 1 PPAD

  • Refine by Type
  • 1 document

  • Refine by Publication Year
  • 1 2017

Questions / Remarks / Feedback
X

Feedback for Dagstuhl Publishing


Thanks for your feedback!

Feedback submitted

Could not send message

Please try again later or send an E-mail