Authors: G. Iori and C. Deissenberg
Journal: in E.J. Konotghiorghes, B. Rustem and P. Winker (Eds.): "Computational Methods in Financial Engineering", Springer, Heidelberg, 2008
Status: Book Chapters
Abstract: This paper compares the so-called gross and net architectures for securities settlement. It studies the settlement risk arising from exogenous operational delays and compares the importance of settlement failures under the two architectures, as a function of the length of the settlement cycle and of different market conditions. Under both architectures, settlement failures are non-monotonically related to the length of settlement cycle. There is no evidence that continuous time settlement provides always higher stability. Gross systems appear to be more stable than net systems.