Settlement Risk under Gross and Net Settlement

Charles Kahn, James McAndrews and William Roberds

Journal of Money, Credit and Banking, 2003, vol. 35, issue 4, 591-608

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 their portfolios 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 can prevent certain gridlock situations, which may arise in gross settlement in the absence of delivery versus payment requirements. In addition, we show that net settlement can economize on collateral requirements and avoid trading delays.

Date: 2003
References: Add references at CitEc
Citations: View citations in EconPapers (43)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Settlement risk under gross and net settlement (1999)
Working Paper: Settlement risk under gross and net settlement (1999)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:35:y:2003:i:4:p:591-608

Access Statistics for this article

Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().