Settlement Risk under Gross and Net Settlement

Settlement Risk under Gross and Net Settlement

Previous comparative analyses of gross and net settlement have focused on the credit risk of the central counterparty in net settlement arrangements, and on the incentives for participants to alter the risk of the portfolio under net settlement. By modeling the trading economy that generates the demand for payment services, we are able to show some largely unexplored advantages of net settlemen...

Real Time Gross Settlement Systems: An Overview

Trial and Settlement under Cumulative Prospect Theory

It is well-known that if the parties in a legal dispute agree about the likelihood of potential trial outcomes then they will be inclined to settle vs. going to trial in order to reduce litigation costs and risk. In this paper, we assume that both plaintiff and defendant evaluate this decision in accordance with Cumulative Prospect Theory. It is found that the two parties will sometimes be unab...

Payments Systems , Settlement , and Risk ( Preliminary ) ¤

We study two dynamic models of payments systems. The ...rst is a deterministic model with spatial separation where we consider alternative payments systems institutions and their implications for allocation and welfare. A payments system with period-by-period settlement in outside money improves on decentralized exchange using currency by reducing average cash balances and the average holding p...

Estimating Settlement Risk and the Potential for Contagion in Canada’s Automated Clearing Settlement System

Payments systems operate virtually unnoticed in our daily lives and yet are crucial to a wellfunctioning economy and financial system. Because they explicitly link financial institutions, payments systems provide a way to transmit risk within, and between, financial systems. Ideally, payments systems should be designed and operated so as not to add risk in the event of a crisis. The author exam...