Optimal Intervention under Stress Scenarios: A Case of the Korean Financial System

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We consider optimal intervention methods under budget constraints when financial systems face economic shocks. We propose two policies formulated by mixed-integer linear programs where regulators inject cash into institutions. One is to minimize systemic losses, and the other is to minimize the number of defaulting institutions. Using publicly available data on the Korean financial system, we construct its entire network and apply stress scenarios to the system to compare the performances of intervention strategies and derive insights on their workings. (C) 2019 Elsevier B.V. All rights reserved.
Publisher
ELSEVIER SCIENCE BV
Issue Date
2019-07
Language
English
Article Type
Article
Citation

OPERATIONS RESEARCH LETTERS, v.47, no.4, pp.257 - 263

ISSN
0167-6377
DOI
10.1016/j.orl.2019.03.019
URI
http://hdl.handle.net/10203/263860
Appears in Collection
IE-Journal Papers(저널논문)
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