An agent-based model of payment systems
This paper lays out and simulates a multi-agent, multi-period model of an RTGS payment system. At the beginning of the day, banks choose how much costly liquidity to allocate to the settlement process. Then, they use it to execute an exogenous, random stream of payment orders. If a bank's liquidity stock is depleted, payments are queued until new liquidity arrives from other banks, imposing costs on the delaying bank. The paper studies the equilibrium level of liquidity posted in the system, performing some comparative statics and obtaining: i) a liquidity demand curve which links liquidity to delay costs and ii) insights on the efficiency of alternative system configurations.
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| Length: | 26 pages |
| Date of creation: | Aug 2008 |
| Handle: | RePEc:boe:boeewp:0352 |
| Contact details of provider: | Postal: Bank of England, Threadneedle Street, London, EC2R 8AH Phone: +44 (0)171 601 4030 Fax: +44 (0)171 601 5196 Web page: http://www.bankofengland.co.uk/ Email: More information through EDIRC
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References listed on IDEAS
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.:
- Kahn, Charles M & Roberds, William, 1998.
"Payment System Settlement and Bank Incentives,"
Review of Financial Studies,
Society for Financial Studies, vol. 11(4), pages 845-870.
- Charles M. Kahn & William Roberds, "undated". "Payment System Settlement and Bank Incentives," Center for Financial Institutions Working Papers 97-32, Wharton School Center for Financial Institutions, University of Pennsylvania.
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- Bech, Morten L. & Garratt, Rod, 2003. "The intraday liquidity management game," Journal of Economic Theory, Elsevier, vol. 109(2), pages 198-219, April.
- Bech, Morten L. & Garratt, Rod, 2001. "The Intraday Liquidity Management Game," University of California at Santa Barbara, Economics Working Paper Series qt0m6035wg, Department of Economics, UC Santa Barbara.
- Beyeler, Walter E. & Glass, Robert J. & Bech, Morten L. & Soramäki, Kimmo, 2007. "Congestion and cascades in payment systems," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 384(2), pages 693-718.
- Walter E. Beyeler & Robert J. Glass & Morten L. Bech & Kimmo Soramaki, 2006. "Congestion and cascades in payment systems," Staff Reports 259, Federal Reserve Bank of New York.
- Leinonen, Harry, 2005. "Liquidity, risks and speed in payment and settlement systems : a simulation approach," Scientific Monographs, Bank of Finland, number 2005_031.
- John P. Jackson & Mark J. Manning, 2007. "Central Bank intraday collateral policy and implications for tiering in rtgs payment systems," DNB Working Papers 129, Netherlands Central Bank, Research Department.
- Chakravorti, Sujit, 2000. "Analysis of systemic risk in multilateral net settlement systems," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 10(1), pages 9-30, January.
- Dindos, Martin & Mezzetti, Claudio, 2006. "Better-reply dynamics and global convergence to Nash equilibrium in aggregative games," Games and Economic Behavior, Elsevier, vol. 54(2), pages 261-292, February.
- Morten L. Bech & Rodney J. Garratt, 2012. "Illiquidity in the Interbank Payment System Following Wide‐Scale Disruptions," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(5), pages 903-929, 08.
- Morten L. Bech & Rod Garratt, 2006. "Illiquidity in the interbank payment system following wide-scale disruptions," Staff Reports 239, Federal Reserve Bank of New York.
- Drew Fudenberg & David K. Levine, 1998. "The Theory of Learning in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061945, July.
- Drew Fudenberg & David K. Levine, 1996. "The Theory of Learning in Games," Levine's Working Paper Archive 624, David K. Levine.
- Marco Galbiati & Simone Giansante, 2010. "Emergence of networks in large value payment systems (LVPSs)," Department of Economic Policy, Finance and Development (DEPFID) University of Siena 0110, Department of Economic Policy, Finance and Development (DEPFID), University of Siena. Full references (including those not matched with items on IDEAS)
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