An Analysis of Settlement Risk Contagion in Alternative Securities Settlement Architecture
AbstractThis paper compares the so-called gross and net architectures for securities settlement. It studies the settlement risk arising from exogenous operational delays and compares the importance of settlement failures under the two architectures, 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 settlement cycle. There is no evidence that continuous time settlement provides always higher stability. Gross systems appear to be more stable than net systems.
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Bibliographic InfoPaper provided by Department of Economics, City University London in its series Working Papers with number 08/03.
Date of creation: 2008
Date of revision:
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Postal: Department of Economics, Social Sciences Building, City University London, Whiskin Street, London, EC1R 0JD, United Kingdom,
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Web page: http://www.city.ac.uk
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Security clearing and settlement; gross and net systems; contagion;
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Journal of Financial Intermediation,
Elsevier, vol. 16(1), pages 91-116, January.
- Holthausen, Cornelia & Tapking, Jens, 2004. "Raising rival's costs in the securities settlement industry," Working Paper Series 0376, European Central Bank.
- repec:fth:bfsefi:e14 is not listed on IDEAS
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