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An Analysis of Settlement Risk Contagion in Alternative Securities Settlement Architectures

In: Computational Methods in Financial Engineering

Author

Listed:
  • Giulia Iori

    (City University)

  • Christophe Deissenberg

    (Université de la Méditerranée and GREQAM)

Abstract

The so-called gross and net architectures for securities settlement are compared. The settlement risk arising from exogenous operational delays is studied and the importance of settlement failures under the two architectures is investigated as a function of the length of the settlement cycle and of different market conditions. Under both architectures, settlement failures are non-monotonically related to the length of the settlement cycle. There is no evidence that continuous time settlement provides always higher stability. Gross systems appear to be more stable than net systems.

Suggested Citation

  • Giulia Iori & Christophe Deissenberg, 2008. "An Analysis of Settlement Risk Contagion in Alternative Securities Settlement Architectures," Springer Books, in: Erricos J. Kontoghiorghes & Berç Rustem & Peter Winker (ed.), Computational Methods in Financial Engineering, pages 299-315, Springer.
    • Handle: RePEc:spr:sprchp:978-3-540-77958-2_15
    DOI: 10.1007/978-3-540-77958-2_15
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    References listed on IDEAS

    as
    1. Devriese, Johan & Mitchell, Janet, 2006. "Liquidity risk in securities settlement," Journal of Banking & Finance, Elsevier, vol. 30(6), pages 1807-1834, June.
    2. Holthausen, Cornelia & Tapking, Jens, 2007. "Raising rival's costs in the securities settlement industry," Journal of Financial Intermediation, Elsevier, vol. 16(1), pages 91-116, January.
    3. repec:zbw:bofism:1998_014 is not listed on IDEAS
    4. repec:zbw:bofrdp:2003_007 is not listed on IDEAS
    5. repec:zbw:bofism:2005_031 is not listed on IDEAS
    6. repec:zbw:bofrdp:1999_016 is not listed on IDEAS
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