The Problem
In order to grow financially and become more reliable, banks and firms often loan money to each other. These liabilities create a interconnected financial system. One of the most important aspects of these financial systems are the resulting liabilities that each firm has, as well as the assets they hold at any given time. Occasionally a few firms or even entire markets run into trouble and cause firms to want back what they are owed by other firms. Since these firms belong to a larger interconnected network, if the other firm does not have enough money to meet their financial liability, it looks to other firms that owe them money. This process can become cyclical and can effect many or all firms in a system. The aim of this research project is to create a model that tracks these liabilities and determines the payments each firm needs to make to other firms in the financial system.
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