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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- Devriese, Johan & Mitchell, Janet, 2005.
"Liquidity Risk in Securities Settlement,"
CEPR Discussion Papers
5123, C.E.P.R. Discussion Papers.
- Johan Devriese & Janet Mitchell, 2005. "Liquidity risk in securities settlement," Working Paper Research 72, National Bank of Belgium.
- Koponen, Risto & Soramäki, Kimmo, 1998. "Intraday liquidity needs in a modern interbank payment system : A simulation approach," Scientific Monographs, Bank of Finland, number 1998_014, 05.
- Leinonen, Harry, 2005. "Liquidity, risks and speed in payment and settlement systems : a simulation approach," Scientific Monographs, Bank of Finland, number 2005_031, 05.
- Holthausen, Cornelia & Tapking, Jens, 2007. "Raising rival's costs in the securities settlement industry," Journal of Financial Intermediation, Elsevier, vol. 16(1), pages 91-116, January. Full references (including those not matched with items on IDEAS)
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