Mathematics Colloquium
Hamed Amini
University of Florida
Title: Fire Sales, Default Cascades and Complex Financial Networks
Date: Friday, October 21, 2022
Place and Time: LOV 101, 3:05-3:55 pm
Abstract.
In this talk, we present a general tractable framework for understanding the joint impact of fire sales and insolvency cascades on systemic risk in financial networks. Our limit theorems quantify how price mediated contagion across institutions with common asset holding could worsen cascades of insolvencies in a heterogeneous financial network. We show that the equilibrium prices of illiquid assets have asymptotically Gaussian fluctuations. Our numerical studies investigate the effect of heterogeneity in network structure and price impact function on the final size of default cascade and fire sales loss. The talk is based on joint work with Zhongyuan Cao and Agnès Sulem.