Asymmetric information is widely considered to be a major obstacle to settlements. We argue that litigants facing asymmetric information can use a simple add-on to the settlement offer in order to overcome the information barriers to settlements. In particular, the informed party can promise to...

This article focuses on the liability of clearing brokers to introduced customers for the misconduct of their introducing firms. To delineate this liability, the article describes the distinct and separate responsibilities and functions of clearing and introducing firms in relation to...

We present a simple continuous-time model of clearing in financial networks. Financial firms are represented as “tanks” filled with fluid (money), flowing in and out. Once the “pipes” connecting the “tanks” are open, the system reaches the clearing payment vector in finite time....

The banking sector is considered to be the back-bone of Indian economy. The economic reforms and the various e-banking techniques followed by the banks during the last decade strengthened their financial position. The adoption of IT and communication made the things easier for the banks. It made...

Central counterparty default waterfalls act as a last line of defense in over-the-counter markets by managing and allocating resources to cover defaults of clearing members and clients. However, central counterparties face competing objectives in setting up their default waterfalls. In this...

By stepping between bilateral counterparties, a central counterparty (CCP) transforms credit exposure. CCPs generally improve financial stability. Nevertheless, large CCPs are by nature concentrated and interconnected with major global banks. Moreover, although they mitigate credit risk, CCPs...

Canada's Large Value Transfer System (LVTS) is in the process of being replaced by a real-time gross settlement (RTGS) system. A pure RTGS system typically requires participants to hold large amounts of intraday liquidity in order to settle their payment obligations. Implementing one or more...

Financial market infrastructures and their participants play a crucial role in the economy. Financial or operational challenges faced by one participant can have contagion effects and pose risks to the broader financial system. Our paper applies (deep) neural networks (autoencoder) to detect...

This study investigates whether and how central clearing influences the overall liquidity needs in a network of financial obligations. Utilizing the approach of flow network theory, we show that the effect of adding a central clearing counterparty (CCP) is decomposed into two effects: central...