Payment clearing and settlement systems
-
-
On the Existence and Fragility of Repo Markets
This paper presents a model of an over-the-counter bond market in which bond dealers and cash investors arrange repurchase agreements (repos) endogenously. -
Estimating the Demand for Settlement Balances in the Canadian Large Value Transfer System
This paper applies a static model of an interest rate corridor to the Canadian data, and estimates the aggregate demand for central-bank settlement balances in the Large Value Transfer System (LVTS). -
May 17, 2012
Conference Summary: New Developments in Payments and Settlement
The Bank of Canada’s annual conference, held in November 2011, brought together leading researchers from universities, central banks and other institutions from around the world. Divided into four sessions plus two keynote addresses, the conference covered such topics as the use of cash and other means of payment in retail transactions, large-value payments systems, and […] -
The Impact of Retail Payment Innovations on Cash Usage
Many predict that innovations in retail payment may render cash obsolete. We investigate this possibility in the context of recent payment innovations such as contactless-credit and stored-value cards. -
A Note on Central Counterparties in Repo Markets
The author introduces a central counterparty (CCP) into a model of a repo market. Without the CCP, there exist multiple equilibria in the model. In one of the equilibria, a repo market emerges as bond dealers and cash investors choose to arrange repos in an over-the-counter bond market. -
November 17, 2011
Liquidity Provision and Collateral Haircuts in Payments Systems
Central banks play a pivotal role in well-functioning payments systems by providing liquidity via collateralized lending. This article discusses the role of collateral and haircut policy in central bank lending, as well as the distinguishing features of the central bank’s policy relative to private sector practices. It presents a model that explicitly incorporates the unique role of central banks in the payments system and argues that central banks must consider how their haircut policies affect the relative price and liquidity of assets, the market’s asset allocation, and the likelihood of participants to default. Furthermore, under extraordinary circumstances, there is a rationale for the central bank to temporarily reduce haircuts or broaden the list of eligible collateral to mitigate the shortage of liquidity in the market. -
Analyzing Default Risk and Liquidity Demand during a Financial Crisis: The Case of Canada
This paper explores the reliability of using prices of credit default swap contracts (CDS) as indicators of default probabilities during the 2007/2008 financial crisis. -
The Impact of Operational Events on the Network Structure of the LVTS
The author uses a quantitative network analysis approach to assess how participants in the Large Value Transfer System (LVTS) respond to partial outages at other banks.
-
Lessons from International Central Counterparties: Benchmarking and Analysis
Since the financial crisis, attention has focused on central counterparties (CCPs) as a solution to systemic risk for a variety of financial markets, ranging from repurchase agreements and options to swaps.