Controllability of economic models

Overview

The 2008 crisis following the bankruptcy of Lehmann Brother in september 15, 2008 provides new challenges for the economists and scientists to understand and forecast the behaviours of financial markets. The concept of Too Big To Fail arises meaning that a large market actor has systemic impact and should be protected against bankruptcy in case of crisis. Such concept defines clearly which market actor to control.

We investigate such systemic impact by a simple model of credit market that consists of financial actors lending and redeeming back cash when debts become mature. We built our model on complex networks that are observed in real interbank credit linkages. In controllability point of view, we tackle with the most fragile financial actors and what will be the cost to control them to insure the stability of the financial market.

Keywords systemic risk, complex systems, complex networks, controllability

Involved Persons