Before revision: We consider the problem of clearing a system of interconnected banks . Prior work has shown that when banks can only enter into simple debt contracts with each other, then a clearing vector of payments can be computed in polynomial time.
After revision: The 2008 financial crisis has been attributed to "excessive complexity" of the financial system due to financial innovation. We employ computational complexity theory to make this notion precise. Specifically, we consider the problem of clearing a system of interconnected banks . Prior work has shown that when banks can only enter into simple debt contracts with each other, then a clearing vector of payments can be computed in polynomial time.