Clearing Sections of Lattice Liability Networks

Abstract: Modern financial networks involve complex obligations that transcend simple monetary debts: multiple currencies, prioritized claims, supply chain dependencies, and more. We present a mathematical framework that unifies and extends these scenarios by recasting the classical Eisenberg-Noe model of financial clearing in terms of lattice liability networks. Each node in the network carries a complete lattice of possible states, while edges encode nominal liabilities. Our framework generalizes the scalar-valued clearing vectors of the classical model to lattice-valued clearing sections, preserving the elegant fixed-point structure while dramatically expanding its descriptive power. Our main theorem establishes that such networks possess clearing sections that themselves form a complete lattice under the product order. This structure theorem enables tractable analysis of equilibria in diverse domains, including multi-currency financial systems, decentralized finance with automated market makers, supply chains with resource transformation, and permission networks with complex authorization structures. We further extend our framework to chain-complete lattices for term structure models and multivalued mappings for complex negotiation systems. Our results demonstrate how lattice theory provides a natural language for understanding complex network dynamics across multiple domains, creating a unified mathematical foundation for analyzing systemic risk, resource allocation, and network stability.