Abstract
This project examines how different strategies of selling stocks in a financial crisis effect both the health of a financial system and the firms within that system. The systems we study are interconnected networks of firms in which each has financial liabilities to others. The value of each firm is often dependent on the payoffs they receive from their claims on other firms in the financial system. To determine the health of the system and value of each firm, we find a clearing payment vector that efficiently clears the obligations of each firm. We first consider systems in which each firm has cash, but no additional assets, and systems in which each firm has cash and a variable amount of a specific stock. We then consider systems more relevant to real-world settings in which each firm has cash and variable amounts of multiple stocks. In these systems, each firm has many possible strategies for selling stocks. Any given strategy can change the final value of the firm, which in turn affects the final value of connected firms and the overall health of the system. We analyze the different strategies and apply them to different systems to determine which are best for the health of an individual firm and which are best for the health of the system. The findings of this project can be used by individual firms as well as system regulators to determine the best strategies in a financial crisis.