# Control of Dynamic Financial Networks (The Extended Version)

arXiv: https://arxiv.org/abs/2205.08879 · HTML: https://mlsanity.com/paper/2205.08879/

## Key facts

- Cited by 1 papers in the map (data through 14 Oct 2026).
- First posted on arXiv 18 May 2022.

## Built on by (most cited first, 1 of 1)

- [Conditional Forecasting of Margin Calls using Dynamic Graph Neural Networks](https://mlsanity.com/paper/2410.23275/) (2024)

## Abstract (arXiv)

The current global financial system forms a highly interconnected network where a default in one of its nodes can propagate to many other nodes, causing a catastrophic avalanche effect. In this paper we consider the problem of reducing the financial contagion by introducing some targeted interventions that can mitigate the cascaded failure effects. We consider a multi-step dynamic model of clearing payments and introduce an external control term that represents corrective cash injections made by a ruling authority. The proposed control model can be cast and efficiently solved as a linear program. We show via numerical examples that the proposed approach can significantly reduce the default propagation by applying small targeted cash injections.