Giulia Iori () (Department of Economics, City University, London) Christophe Deissenberg () (Universit´e de la M´editerran´ee and GREQAM, Chˆateau Lafarge, Route des Milles, 13290 Les Milles, France.)
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This 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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