Journal Article
Understanding intraday credit in large-value payment systems
Abstract: This article explains how large-value payment systems work, using either gross or net settlement. The author discusses risk control in a real-time gross settlement system and analyzes the pricing of credit to provide intraday liquidity. She argues for distinguishing between consumption/investment debt and payment debt. A theoretical model suggests that, under the assumption that there are no opportunities for intraday optimization of consumption and production, the risk-free rate on intraday payment credit should be zero. This is because the cost of intraday liquidity is a transaction cost of the underlying goods/assets trade and, thus, should be minimized.
Keywords: Payment systems; Credit; Debt; Liquidity (Economics);
Access Documents
File(s): File format is application/pdf http://www.chicagofed.org/digital_assets/publications/economic_perspectives/2000/3qep3.pdf
Authors
Bibliographic Information
Provider: Federal Reserve Bank of Chicago
Part of Series: Economic Perspectives
Publication Date: 2000
Volume: 25
Issue: Q III
Pages: 29-44