To Fully Net or Not to Net: Adverse Effects of Partial Multilateral Netting

Operations Research, Forthcoming

Swiss Finance Institute Research Paper No. 14-63

22 Pages Posted: 1 Nov 2014 Last revised: 18 Jan 2016

Hamed Amini

Ecole Polytechnique Fédérale de Lausanne

Damir Filipović

Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute

Andreea Minca

Cornell University

Date Written: June 25, 2015

Abstract

We show that partial versus full multilateral netting of interbank liabilities increases bank shortfall, and reduces clearing asset price and aggregate bank surplus. We also show that partial multilateral netting can be worse than no netting at all.

Keywords: Over the Counter Markets, Financial Network, Partial Multilateral Netting

JEL Classification: C44, C54, C62, G01, G18, G32

Suggested Citation

Amini, Hamed and Filipović, Damir and Minca, Andreea, To Fully Net or Not to Net: Adverse Effects of Partial Multilateral Netting (June 25, 2015). Operations Research, Forthcoming; Swiss Finance Institute Research Paper No. 14-63. Available at SSRN: https://ssrn.com/abstract=2516974 or http://dx.doi.org/10.2139/ssrn.2516974

Hamed Amini

Ecole Polytechnique Fédérale de Lausanne ( email )

Station 5
Odyssea 1.04
1015 Lausanne, CH-1015
Switzerland

Damir Filipovic (Contact Author)

Ecole Polytechnique Fédérale de Lausanne ( email )

Odyssea
Station 5
Lausanne, 1015
Switzerland

HOME PAGE: http://people.epfl.ch/damir.filipovic

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Andreea Minca

Cornell University ( email )

222 Rhodes Hall
Ithaca, NY NY 14853
United States

HOME PAGE: http://people.orie.cornell.edu/acm299/

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