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Simulating interbank payments and securities settlement mechanism with the BoF-PSS2 simulator

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  • Leinonen, Harry
  • Soramäki, Kimmo

Abstract

The simulation technique provides a new means for analysing complex interdependencies in payment and securities settlement processing. The Bank of Finland has developed a payment and settlement system simulator (BoF-PSS2) that can be used for constructing simulation models of payment and securities settlement systems.This paper describes the main elements of payment and settlement systems (system structures, interdependencies, processing steps, liquidity consumption, cost and risk dimensions) and how these can be treated in simulation studies.It gives also examples on how these elements have been incorporated in the simulator, as well as an overview of the structure and the features of the BoF-PSS2 simulator. Key words: simulations, simulator, payment systems, clearing/settlement, and liquidity

Suggested Citation

  • Leinonen, Harry & Soramäki, Kimmo, 2003. "Simulating interbank payments and securities settlement mechanism with the BoF-PSS2 simulator," Research Discussion Papers 23/2003, Bank of Finland.
    • Handle: RePEc:bof:bofrdp:2003_023
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    References listed on IDEAS

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    13. James J. McAndrews & George Wasilyew, 1995. "Simulations of failure in a payment system," Working Papers 95-19, Federal Reserve Bank of Philadelphia.
    14. Leinonen, Harry, 2003. "Restructuring securities systems processing : A blue print proposal for real-time/t+0 processing," Research Discussion Papers 7/2003, Bank of Finland.
    15. Leinonen, Harry & Lumiala, Veli-Matti & Sarlin, Riku, 2002. "Settlement in modern network-based payment infrastructures : Description and prototype of the E-Settlement model," Research Discussion Papers 23/2002, Bank of Finland.
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    Cited by:

    1. Galos, Peter & Soramäki, Kimmo, 2005. "Systemic risk in alternative payment system designs," Working Paper Series 508, European Central Bank.
    2. Shafransky, Yakov M. & Doudkin, Alexander A., 2006. "An optimization algorithm for the clearing of interbank payments," European Journal of Operational Research, Elsevier, vol. 171(3), pages 743-749, June.
    3. Iivarinen, Timo, 2004. "Large value payment systems : principles and present and future developments," Research Discussion Papers 13/2004, Bank of Finland.

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