An Analysis of Settlement Risk Contagion in Alternative Securities Settlement Architecture
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.
|Date of creation:||2008|
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"Liquidity Risk in Securities Settlement,"
CEPR Discussion Papers
5123, C.E.P.R. Discussion Papers.
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- Leinonen, Harry, 2005. "Liquidity, risks and speed in payment and settlement systems : a simulation approach," Scientific Monographs, Bank of Finland, number 2005_031. Full references (including those not matched with items on IDEAS)
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