Economy Seminar - Taner Yiğit

Date and Time Date and Time

2024-05-23 17:30

2024-05-23 18:45

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CASE 127

Economy Seminar - Taner Yiğit

In this research, we present a new framework that solves the clearing payments of interconnected banks in a financial networks. Our method deviates from the industry standards of fixed point theorem or other optimization techniques. In this way, we introduce a key concept of asymmetry that should be checked when one considers (counter)measures of default risk. We show that this measure not only provides new capital requirement ratios (rather than one-size fits all values like Basel III), but also allows us to identify the direction of contagion and the flow of funds in it. Another key claim of our study is the “full and costless” elimination of payment defaults in networks. We display how payment risk in financial networks can be eliminated without the need for any equity, and that equity holdings should only be connected to the credit risks of banks.

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Taner Yiğit- Bilkent University