A dynamical systems approach to systemic risk in a financial network

The insolvency of a financial entity such as a bank can trigger a sequence of defaults in a network of financial entities interconnected through mutual financial obligations, thus posing a systemic risk to all the financial entities that make up the network. This paper studies the well-known Eisenberg-Noe model for systemic risk from a dynamical systems perspective. In particular, we model the sequence of defaults in the form of a dynamical system, and provide results on its stability and asymptotic behavior.