---
author:
- 'Tathagata Banerjee[^1]'
- 'Alex Bernstein[^2]'
- 'Zachary Feinstein[^3]'
bibliography:
- 'bibtex2.bib'
title: Dynamic clearing and contagion in financial networks
---

Introduction {#sec:intro}
============

Financial networks and the contagion of bank failures have been widely studied beginning with the seminal work on financial payment networks by Eisenberg & Noe [@EN01]. The 2007-2009 financial crisis and credit crunch showed the severe impacts that systemic crises can have on the financial sector and the economy as a whole. As the costs of such cascading events is tremendous, the modeling of such events is imperative. Recently there have been significant studies on modeling financial systemic risk and financial contagion. Two major classes of models exist for systemic risk, i.e., those based on network models from [@EN01] and those based on a mean field approach [@fouque2013illustrated; @fouque2015meanfield]. Notably, the network model approach generally is considered in only a static, single time, setting while the mean field approach is considered as a differential system. In this paper we will construct a dynamic extension of the interbank network model of [@EN01] thus closing the gap between these two streams of literature.

Interbank networks were studied first in [@EN01] to model the spread of defaults 