This paper studies the optimal clearing arrangement for bilateral financial contracts in which an assessment of …, at a cost, about the commitment of their borrowers, which affects the assessment of counterparty risk. Clearing through a … and reveal information. If information acquisition is incentive‐compatible, then lenders choose central clearing. If it is …

We consider financial networks where agents are linked to each other with financial contracts. A centralized clearing … lattice structure, leading to the existence of a least and a greatest clearing payment matrix. Previous research has shown how … decentralized clearing selects the least clearing payment matrix. We present a centralized approach towards clearing in order to …

Bilateral financial contracts typically require an assessment of counterparty risk. Central clearing of these financial … and to reveal information about such risk. When considering this trade-off, participants would choose central clearing if … information acquisition is incentive compatible. If it is not, they may prefer bilateral clearing, when this choice prevents …

present a convenient representation of bankruptcy rules. A clearing payment matrix is a payment matrix consistent with the … prevailing bankruptcy rules that satisfies limited liability and priority of creditors. Both clearing payment matrices and the … decentralized clearing processes and show the convergence of any such process in finitely many steps to the least clearing payment …

We study bankruptcy problems in financial networks in the presence of general bankruptcy laws. The set of clearing … payment matrices is shown to be a lattice, which guarantees the existence of a greatest and a least clearing payment …. Multiplicity of clearing payment matrices is both a theoretical and a practical concern. We present a new condition for uniqueness …

to specify the way agents are going to be rationed. A clearing payment matrix is a payment matrix consistent with the … prevailing bankruptcy rules that satisfies limited liability and priority of creditors. Since clearing payment matrices and the … existing literature, which studies centralized clearing procedures, we introduce a large class of decentralized clearing …