  The current global financial system forms a highly interconnected network
where a default in one of its nodes can propagate to many other nodes, causing
a catastrophic avalanche effect. In this paper we consider the problem of
reducing the financial contagion by introducing some targeted interventions
that can mitigate the cascaded failure effects. We consider a multi-step
dynamic model of clearing payments and introduce an external control term that
represents corrective cash injections made by a ruling authority. The proposed
control model can be cast and efficiently solved as a linear program. We show
via numerical examples that the proposed approach can significantly reduce the
default propagation by applying small targeted cash injections.
