The paper "Systemic Risk in Financial Systems" by Larry Eisenberg and Thomas H. Noe outlines a very useful and interesting model relating to clearing vectors in an interdependent financial system. Specifically, the paper discusses three different implementations of the model: an optimization algorithm using linear algebra (Click Here), a fixed point algorithm (Click Here), and a fictitious default algorithm (Click Here).

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Most variables needed in order to implement the Eisenberg-Noe model for a clearing system are as follows:

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There are many assumptions and conditions needed for the Eisenberg-Noe model. Please Click Here for our complete Capstone final report discussing these assumptions and conditions or Click Here to read the original Eisenberg-Noe paper.

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