2024/09/27 by Simon Dohn, Dohn, Simon, K A Hansen +3
Economics, Econometrics and Finance · #Banking stability, regulation, efficiency #Computer Science and Game Theory (cs.GT) #FOS: Computer and information sciences #FOS: Economics and business #Risk Management (q-fin.RM)
paper · pdf · doi:10.48550/arxiv.2409.18717
openalex publication_date 2024/09/27 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
We study computational problems in financial networks of banks connected by debt contracts and credit default swaps (CDSs). A main problem is to determine clearing payments, for instance right after some banks have been exposed to a financial shock. Previous works have shown the ε-approximate version of the problem to be PPAD-complete and the exact problem FIXP-complete. We show that PPAD-hardness hold when ε ≈ 0.101, improving the previously best bound significantly. Due to the fact that the clearing problem typically does not have a unique solution, or that it may not have a solution at all in the presence of default costs, several natural decision problems are also of great interest. We show two such problems to be ∃ℝ-complete, complementing previous NP-hardness results for the approximate setting.