@techreport{1c18cd0f90ec476e9b5970c1bf5c8543,
title = "Perspective Invariance in Financial Networks",
abstract = "In a financial network, agents have individual estates, and their interdependence arises from mutual financial contracts. Network clearing occurs according to a transfer scheme that specifies the payments agents make to settle these contracts. Multiple valid transfer schemes can exist for a financial network. For this reason, we use transfer rules that assign exactly one transfer scheme to each network. Depending on the context, it can be more natural to adopt either a primal perspective to network clearing, focusing on the agents' available estates, or a dual perspective, focusing on their losses. We study cases where both perspectives are equally relevant. A transfer rule is perspective invariant if the payments specified from the primal and dual perspectives are exactly equal. Without additional structure, however, such rules permit minimal clearing for one network and maximal clearing for another. Therefore, we consider transfer rules based on agent-specific claims rules and weights, which do not differentiate between financial networks when assigning a transfer scheme. We show that these transfer rules are perspective invariant if and only if the claims rules are self-dual and the weights are all equal to one-half. Specifically, the perspective-invariant transfer rule based on the proportional claims rule dictates that network clearing should occur using the average of the minimal and maximal clearing payments. This structure is unique to the proportional rule. Finally, we find that the characterization of the proportional rule using self-duality and composition does not carry over to the financial network setting.",
keywords = "self-duality, transfer rules, nondifferentiation, characterization, proportional rule",
author = "Martijn Ketelaars",
note = "CentER Discussion Paper Nr. 2024-018",
year = "2024",
month = aug,
day = "26",
language = "English",
volume = "2024-018",
series = "CentER Discussion Paper",
publisher = "CentER, Center for Economic Research",
pages = "1--33",
type = "WorkingPaper",
institution = "CentER, Center for Economic Research",
}