Optimal Payments to Connected Depositors in Turbulent Times: A Markov Chain Approach
We propose a discrete time probabilistic model of depositor behavior which takes into account the information flow among depositors. In each time period each depositors’ current state is determined in a stochastic way, based on their previous state, the state of other connected depositors, and the s...
Saved in:
| Main Authors: | , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Wiley
2018-01-01
|
| Series: | Complexity |
| Online Access: | http://dx.doi.org/10.1155/2018/9434608 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1832556930239823872 |
|---|---|
| author | Dávid Csercsik Hubert János Kiss |
| author_facet | Dávid Csercsik Hubert János Kiss |
| author_sort | Dávid Csercsik |
| collection | DOAJ |
| description | We propose a discrete time probabilistic model of depositor behavior which takes into account the information flow among depositors. In each time period each depositors’ current state is determined in a stochastic way, based on their previous state, the state of other connected depositors, and the strategy of the bank. The bank offers payment to impatient depositors (those who want to withdraw their funds) who accept or decline them with certain probability, depending on the offered amount. Our principal aim is to see what are the optimal offers of the bank if it wants to keep the expected chance of a bank run under a certain level and minimize its expected payments, while taking into account the connection structure of the depositors. We show that in the case of the proposed model this question results in a nonlinear optimization problem with nonlinear constraints and that the method is capable of accounting for time-varying resource limits of the bank. Optimal offers increase (a) in the degree of the depositor, (b) in the probability of being hit by a liquidity shock, and (c) in the effect of a neighboring impatient depositor. |
| format | Article |
| id | doaj-art-fbf9fa286f9349419659c9535f0f091a |
| institution | Kabale University |
| issn | 1076-2787 1099-0526 |
| language | English |
| publishDate | 2018-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Complexity |
| spelling | doaj-art-fbf9fa286f9349419659c9535f0f091a2025-02-03T05:44:10ZengWileyComplexity1076-27871099-05262018-01-01201810.1155/2018/94346089434608Optimal Payments to Connected Depositors in Turbulent Times: A Markov Chain ApproachDávid Csercsik0Hubert János Kiss1Faculty of Information Technology and Bionics, Pázmány Péter Catholic University, P.O. Box 278, Budapest 1444, HungaryMTA KRTK KTI, Tóth Kálmán U. 4., Budapest 1097, HungaryWe propose a discrete time probabilistic model of depositor behavior which takes into account the information flow among depositors. In each time period each depositors’ current state is determined in a stochastic way, based on their previous state, the state of other connected depositors, and the strategy of the bank. The bank offers payment to impatient depositors (those who want to withdraw their funds) who accept or decline them with certain probability, depending on the offered amount. Our principal aim is to see what are the optimal offers of the bank if it wants to keep the expected chance of a bank run under a certain level and minimize its expected payments, while taking into account the connection structure of the depositors. We show that in the case of the proposed model this question results in a nonlinear optimization problem with nonlinear constraints and that the method is capable of accounting for time-varying resource limits of the bank. Optimal offers increase (a) in the degree of the depositor, (b) in the probability of being hit by a liquidity shock, and (c) in the effect of a neighboring impatient depositor.http://dx.doi.org/10.1155/2018/9434608 |
| spellingShingle | Dávid Csercsik Hubert János Kiss Optimal Payments to Connected Depositors in Turbulent Times: A Markov Chain Approach Complexity |
| title | Optimal Payments to Connected Depositors in Turbulent Times: A Markov Chain Approach |
| title_full | Optimal Payments to Connected Depositors in Turbulent Times: A Markov Chain Approach |
| title_fullStr | Optimal Payments to Connected Depositors in Turbulent Times: A Markov Chain Approach |
| title_full_unstemmed | Optimal Payments to Connected Depositors in Turbulent Times: A Markov Chain Approach |
| title_short | Optimal Payments to Connected Depositors in Turbulent Times: A Markov Chain Approach |
| title_sort | optimal payments to connected depositors in turbulent times a markov chain approach |
| url | http://dx.doi.org/10.1155/2018/9434608 |
| work_keys_str_mv | AT davidcsercsik optimalpaymentstoconnecteddepositorsinturbulenttimesamarkovchainapproach AT hubertjanoskiss optimalpaymentstoconnecteddepositorsinturbulenttimesamarkovchainapproach |