Strategic Games in Financial Networks: Complexity and Equilibria

A financial system is represented by a network, where nodes correspond to banks, and directed labeled edges correspond to debt contracts between them. The existence of cycles in the network indicates that a payment of a bank to one of its lenders might result to some incoming payment. So, it is possible that a bank could directly operate somehow to either modify a part of network structure or the exact (partial) payments it makes to each of its creditors, and then indirectly affect the cash inflow back to itself. We naturally assume that the banks are interested in their financial well-being (utility) which is aligned with the amount of incoming payments they receive from the network. This defines various games among the banks that can be seen as utility-maximizing agents who can strategize on corresponding financial operations.

Overall, our work focuses on the impact of strategic operations, such as cash injection, debt removal, debt transfer, and priority-proportional payments, on financial networks. For each operation, we consider the computation of optimizing some desirable objectives in centralized manner, and then study the existence, quality and computation of equilibria for corresponding game that arises.

Based on joint work with Panagiotis Kanellopoulos and Maria Kyropoulou that appeared in ICAIF’21, IJCAI’22, and AAMAS’23.