  In this paper we introduce a generalized extension of the Eisenberg-Noe model
of financial contagion to allow for time dynamics of the interbank liabilities,
including a dynamic examination of default risk. This framework separates the
cash account and long-term capital account to more accurately model the health
of a financial institution. In doing so, such a system allows us to distinguish
between delinquency and default as well as between defaults resulting from
either insolvency or illiquidity.
