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.
|Date of creation:||Aug 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +44 (0)171 601 4030
Fax: +44 (0)171 601 5196
Web page: http://www.bankofengland.co.uk/
More information through EDIRC
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.:
- Kimmo Soramaki & Morten L. Bech & Jeffrey Arnold & Robert J. Glass & Walter Beyeler, 2006.
"The topology of interbank payment flows,"
243, Federal Reserve Bank of New York.
- Soramäki, Kimmo & Bech, Morten L. & Arnold, Jeffrey & Glass, Robert J. & Beyeler, Walter E., 2007. "The topology of interbank payment flows," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 379(1), pages 317-333.
- Charles M. Kahn & William Roberds, 1997.
"Payment system settlement and bank incentives,"
537, Federal Reserve Bank of Chicago.
- Charles M. Kahn & William Roberds, . "Payment System Settlement and Bank Incentives," Center for Financial Institutions Working Papers 97-32, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Charles M. Kahn & William Roberds, 1996. "Payment system settlement and bank incentives," FRB Atlanta Working Paper No. 96-10, Federal Reserve Bank of Atlanta.
- Johan Devriese & Janet Mitchell, 2005.
"Liquidity risk in securities settlement,"
Working Paper Research
72, National Bank of Belgium.
- 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.
- Drew Fudenberg & David K. Levine, 1998.
"The Theory of Learning in Games,"
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 0262061945, June.
- Tesfatsion, Leigh, 2001.
"Introduction to the special issue on agent-based computational economics,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 25(3-4), pages 281-293, March.
- Tesfatsion, Leigh S., 2001. "Introduction to the Special Issue on Agent-Based Computational Economics," Staff General Research Papers 1915, Iowa State University, Department of Economics.
- Tesfatsion, Leigh S., 2001. "Introduction to the Special Issue on Agent-Based Computational Economics," Staff General Research Papers 10038, Iowa State University, Department of Economics.
- 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.
- 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.
- Leinonen (ed), Harry, 2007. "Simulation studies of liquidity needs, risks and efficiency in payment networks," Scientific Monographs E:39/2007, Bank of Finland.
- 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.
- Simon Buckle & Erin Campbell, 2003. "Settlement bank behaviour and throughput rules in an RTGS payment system with collateralised intraday credit," Bank of England working papers 209, Bank of England.
- 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.
- Angelini, Paolo, 1998. "An analysis of competitive externalities in gross settlement systems," Journal of Banking & Finance, Elsevier, vol. 22(1), pages 1-18, January.
- 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.
- Kukushkin, Nikolai S., 2004. "Best response dynamics in finite games with additive aggregation," Games and Economic Behavior, Elsevier, vol. 48(1), pages 94-110, July.
- 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.
When requesting a correction, please mention this item's handle: RePEc:boe:boeewp:0352. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Publications Team)
If references are entirely missing, you can add them using this form.