Uniqueness of Clearing Payment Matrices in Financial Networks

Research output: Working paper / PreprintWorking paper


We study bankruptcy problems in financial networks in the presence of general
bankruptcy laws. The set of clearing payment matrices is shown to be a lattice, which
guarantees the existence of a greatest and a least clearing payment. Multiplicity of
clearing payment matrices is both a theoretical and a practical concern. We present a
new condition for uniqueness that generalizes all the existing conditions proposed in
the literature. Our condition depends on the decomposition of the financial network
into strongly connected components. A strongly connected component which contains
more than one agent is called a cycle and the involved agents are called cyclical agents.
If there is a cycle without successors, then one of the agents in such a cycle should have
a positive endowment. The division rule used by a cyclical agent with a positive
endowment should be positive monotonic and the rule used by a cyclical agent with a
zero endowment should be strictly monotonic. Since division rules involving priorities
are not positive monotonic, uniqueness of the clearing payment matrix is a much
bigger concern for such division rules than for proportional ones. We also show how
uniqueness of clearing payment matrices is related to continuity of bankruptcy rules.
Original languageEnglish
PublisherInstitute of Economics, Centre for Economic and Regional Studies
Number of pages32
Publication statusPublished - 2021

Publication series

SeriesKRTK-KTI Working Papers

JEL classifications

  • c71 - Cooperative Games
  • g10 - General Financial Markets: General (includes Measurement and Data)


  • financial networks
  • systemic risk
  • bankruptcy rules
  • fixed points

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