Section: New Results

Systemic Risk

Participants : Andreea Minca, Agnès Sulem.

We are working on the theory of the stochastic control of financial networks.

In two related articles, we find the optimal strategy of a government who seeks to make equity infusions in a banking system prone to insolvency and to bank runs. The first article combines stochastic control and the random graph representation of the financial system developed in Andreea's thesis. The second article combines the network representation of a financial system and the solvency-based mechanism of contagion with another potent source of distress, which is funding illiquidity [31] and [60] .