A Revided Exposition of the Methodology for Testing Payments Systems Risk
AbstractFinancial economists and central bankers have been concerned for some time about the possibility of financial contagion spreading from bank to bank via interbank exposures within the payments system. The initial study of payments system risk was undertaken by Humphrey (1986) who found significant risk in the U.S. Fedwire system in the mid 1980s. Subsequent studies by Angelini, Maresca & Russo (1996), Kuussaari (1996), Northcott (2002), Furfine (2003) and Wang & Docherty (2006) have found, however, little evidence of systemic risk in the payments systems of Italy, Finland, Canada, Australia and in the U.S. inter-bank market. All of these studies employ a methodology in which the effects of a simulated failure at one institution on other institutions are examined and quantified but no formal statement of the simulation process is usually provided. One exception to this is the study by Wang & Docherty (2006) but it is possible to further refine and sharpen the exposition offered in that study. The objective of this short paper is simply to provide such an updated and refined exposition of the default simulation methodology used in payments system risk research.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Finance Discipline Group, UTS Business School, University of Technology, Sydney in its series Working Paper Series with number 159.
Date of creation: 01 Jun 2009
Date of revision:
Contact details of provider:
Postal: PO Box 123, Broadway, NSW 2007, Australia
Phone: +61 2 9514 7777
Fax: +61 2 9514 7711
Web page: http://www.uts.edu.au/about/uts-business-school/finance
More information through EDIRC
payments system; real time gross settlement (RTGS); deferred net settlement (DNS); systemic risk; contaigion;
Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Peter Docherty & G Wang, 2006. "Using Synthetic Data to Measure the Impact of RTGS on Systemic Risk in the Australian Payments System," Working Paper Series 149, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
- James J. McAndews & George Wasilyew, 1995. "Simulations of failure in a payment system," Working Papers 95-19, Federal Reserve Bank of Philadelphia.
- Upper, Christian & Worms, Andreas, 2002.
"Estimating Bilateral Exposures in the German Interbank Market: Is there a Danger of Contagion?,"
Discussion Paper Series 1: Economic Studies
2002,09, Deutsche Bundesbank, Research Centre.
- Upper, Christian & Worms, Andreas, 2004. "Estimating bilateral exposures in the German interbank market: Is there a danger of contagion?," European Economic Review, Elsevier, vol. 48(4), pages 827-849, August.
- Angelini, P. & Maresca, G. & Russo, D., 1996. "Systemic risk in the netting system," Journal of Banking & Finance, Elsevier, vol. 20(5), pages 853-868, June.
- Furfine, Craig H, 2003. " Interbank Exposures: Quantifying the Risk of Contagion," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(1), pages 111-28, February.
- Carol Ann Northcott, 2002. "Estimating Settlement Risk and the Potential for Contagion in Canada's Automated Clearing Settlement System," Working Papers 02-41, Bank of Canada.
- Docherty, Peter & Wang, Gehong, 2010. "Using synthetic data to evaluate the impact of RTGS on systemic risk in the Australian payments system," Journal of Financial Stability, Elsevier, vol. 6(2), pages 103-117, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Duncan Ford).
If references are entirely missing, you can add them using this form.