On some extended mixed integer optimization models of the Eisenberg-Noe model in systemic risk management

doi:10.1111/itor.12939

	On some extended mixed integer optimization models of the Eisenberg-Noe model in systemic risk management
	Dong, Zhi-Long 3; Peng, Jiming 2; Xu, Fengmin 3; Dai, Yu-Hong 1
刊名	INTERNATIONAL TRANSACTIONS IN OPERATIONAL RESEARCH
	2021-02-03
页码	24
关键词	financial network systemic risk mixed integer programming coefficient strengthening sequential linear optimization
ISSN号	0969-6016
DOI	10.1111/itor.12939
英文摘要	The Eisenberg and Noe (EN) model has been widely adopted in the systemic risk management for financial networks. In this paper, we propose a unified EN (U-EN) model, which incorporates both liquidation and bankruptcy costs. We show that the U-EN model is polynomial-time solvable and develop an efficient greedy algorithm to solve it. Then we consider identifying the optimal bailout strategy based on stress testing background and propose a binary EN model with bailout budget constraint (B-EN-B). The B-EN-B model is shown to be NP-hard. We present analysis on the parameter selection and design some preprocessing procedures correspondingly. A sequential coefficient strengthening algorithm is designed to solve the B-EN-B model. Global convergence of the algorithm is established. Moreover, we show that the systemic risk level obtained from the B-EN-B model can be used as a precaution for the social planner. Experiments based on both simulated data and data from the Chinese listed banks' network are reported to demonstrate the efficiency of the proposed algorithms.
资助项目	National Natural Science Foundation of China[11801433] ; National Natural Science Foundation of China[11571271] ; National Natural Science Foundation of China[11631013] ; National Natural Science Foundation of China[11991021] ; National Natural Science Foundation of China[11991020] ; National Natural Science Foundation of China[11971372] ; NSF[CMMI-1131690] ; NSF[CMMI-1537712] ; NSF[CNS-1637347] ; Beijing Academy of Artificial Intelligence (BAAI)
WOS研究方向	Business & Economics ; Operations Research & Management Science
语种	英语
出版者	WILEY
WOS记录号	WOS:000614255700001
内容类型	期刊论文
源URL	[http://ir.amss.ac.cn/handle/2S8OKBNM/58100]
专题	中国科学院数学与系统科学研究院
通讯作者	Peng, Jiming
作者单位	1.Chinese Acad Sci, Acad Math & Syst Sci, Beijing 100190, Peoples R China 2.Univ Houston, Dept Ind Engn, Houston, TX 77204 USA 3.Xi An Jiao Tong Univ, Sch Econ & Finance, Xian 710061, Shaanxi, Peoples R China
推荐引用方式 GB/T 7714	Dong, Zhi-Long,Peng, Jiming,Xu, Fengmin,et al. On some extended mixed integer optimization models of the Eisenberg-Noe model in systemic risk management[J]. INTERNATIONAL TRANSACTIONS IN OPERATIONAL RESEARCH,2021:24.
APA	Dong, Zhi-Long,Peng, Jiming,Xu, Fengmin,&Dai, Yu-Hong.(2021).On some extended mixed integer optimization models of the Eisenberg-Noe model in systemic risk management.INTERNATIONAL TRANSACTIONS IN OPERATIONAL RESEARCH,24.
MLA	Dong, Zhi-Long,et al."On some extended mixed integer optimization models of the Eisenberg-Noe model in systemic risk management".INTERNATIONAL TRANSACTIONS IN OPERATIONAL RESEARCH (2021):24.