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Please use this identifier to cite or link to this item: https://hdl.handle.net/2445/221593
Proportional clearing mechanisms in financial systems: An axiomatic approach
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We address the problem of clearing mutual obligations among agents when a financial network collapses. To do so, we adopt an axiomatic approach and provide the first comprehensive characterization of the rules based on the principle of proportionality, covering the entire domain of financial systems. While a previous attempt by Csóka and Herings (2021) tackled this issue in a context where agents have strictly positive initial endowments, we show that their properties do not fully capture the set of proportional rules when extended to the full financial systems’ domain. To overcome this limitation, we introduce new properties that emphasize the value of equity of the firms in the network. We show that a clearing mechanism satisfies compatibility, limited liability, absolute priority, equity continuity, and non-manipulability by clones if and only if each agent receives a payment proportional to the value of their claims. This characterization holds in the framework studied by Csóka and Herings (2021).
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CALLEJA, Pere and LLERENA GARRÉS, Francesc. Proportional clearing mechanisms in financial systems: An axiomatic approach. Journal of Mathematical Economics. 2024. Vol. 111. ISSN 0304-4068. [consulted: 6 of October of 2026]. Available at: https://hdl.handle.net/2445/221593