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Multi-Period Liability Clearing via Convex Optimal Control

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  • Shane Barratt
  • Stephen Boyd

Abstract

We consider the problem of determining a sequence of payments among a set of entities that clear (if possible) the liabilities among them. We formulate this as an optimal control problem, which is convex when the objective function is, and therefore readily solved. For this optimal control problem, we give a number of useful and interesting convex costs and constraints that can be combined in any way for different applications. We describe a number of extensions, for example to handle unknown changes in cash and liabilities, to allow bailouts, to find the minimum time to clear the liabilities, or to minimize the number of non-cleared liabilities, when fully clearing the liabilities is impossible.

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  • Shane Barratt & Stephen Boyd, 2020. "Multi-Period Liability Clearing via Convex Optimal Control," Papers 2005.09066, arXiv.org.
    • Handle: RePEc:arx:papers:2005.09066
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    References listed on IDEAS

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    Cited by:

    1. Giuseppe Calafiore & Giulia Fracastoro & Anton V. Proskurnikov, 2022. "Control of Dynamic Financial Networks (The Extended Version)," Papers 2205.08879, arXiv.org.

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