Settlement Risk Under Gross and Net Settlement
34 Pages Posted: 9 Oct 2006
Date Written: September 1999
Abstract
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 settlement. We find that net settlement systems avoid certain gridlock situations, which may arise in gross settlement in the absence of delivery versus payment requirements. In addition, net settlement can economize on collateral requirements and avoid trading delays.
Keywords: clearing, settlement, settlement risk
JEL Classification: E58, G21, G28
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Risk and Concentration in Payment and Securities Settlement Systems
By David C. Mills and Travis D. Nesmith
-
Changes in the Timing Distribution of Fedwire Funds Transfers
By Olivier Armantier, James Mcandrews, ...
-
The Timing and Funding of CHAPS Sterling Payments
By Christopher Becher, Marco Galbiati, ...
-
The Network Topology of CHAPS Sterling
By Christopher Becher, Stephen Millard, ...
-
By Ouarda Merrouche and Jochen F. Schanz
-
System-Wide Liquidity Risk in the United Kingdom’s Large-Value Payment System: An Empirical Analysis
By Marcelo Perlin and Jochen F. Schanz
-
Bank Behaviour and Risks in Chaps Following the Collapse of Lehman Brothers
By Evangelos Benos, Rodney Garratt, ...