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Connectivity, Netting, and Systemic Risk of Payment Systems
Stockholm University, Faculty of Social Sciences, Stockholm Business School. University of Chinese Academy of Sciences, China.
Number of Authors: 22019 (English)In: IEEE Systems Journal, ISSN 1932-8184, E-ISSN 1937-9234, Vol. 13, no 2, p. 1658-1668Article in journal (Refereed) Published
Abstract [en]

The stability of payment system is of vital importance to the credit market as well as the economic development. Most researches focus on the effect of system connectivity on systemic risk and demonstrate that connectivity provides both risk-spread channel and risk-sharing mechanism. But the management of systemic risk is quite different in real-time gross settlement system and net settlement system. We provide an integrated analysis of the effect of connectivity and netting on systemic risk in payment systems by considering more detailed network structures of pure creditors and pure debtors. We show that the effect of netting is partly due to the change of network connectivity, which severs the contagion channel of shocks. Moreover, netting can lower the actual magnitude of the shock from the beginning by reducing source bank's debt.

Place, publisher, year, edition, pages
2019. Vol. 13, no 2, p. 1658-1668
Keywords [en]
Netting, network connectivity, simulation, systemic risk
National Category
Computer and Information Sciences Electrical Engineering, Electronic Engineering, Information Engineering Economics and Business
Identifiers
URN: urn:nbn:se:su:diva-171147DOI: 10.1109/JSYST.2018.2883347ISI: 000470839000058OAI: oai:DiVA.org:su-171147DiVA, id: diva2:1343538
Available from: 2019-08-17 Created: 2019-08-17 Last updated: 2019-08-17Bibliographically approved

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