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Freeman (1999) proposes a model in which discount window lending and open market operations have different effects. This is important because in most of the literature, these policies are indistinguishable.

Recent work at the Bank of Canada studied the impact of default in Canada’s large-value payments system, and concluded that participants could readily manage their potential losses (McVanel 2005). In an extension of that work, the authors use a much larger set of daily payments data – with three times as many observations – to […]

Given the Bank of Canada's strong interest in the safe and efficient operation of major clearing and settlement systems, the Bank maintains a rigorous research agenda as a means of informing payments system policy and oversight. In this article, Arjani and Engert review recent research undertaken by Bank staff concerning the risk and efficiency of the Large Value Transfer System (LVTS). Based on the findings from this research, the authors conclude that the design of the LVTS strikes an effective balance between risk and efficiency. The article also demonstrates the increased use of simulation analysis as a tool for conducting payments system research. A brief summary of the Bank's oversight strategy for systemically important payments systems is also provided. Goals for future research are noted as well, including modelling of participant behaviour and continued external collaboration with other researchers.

Payments systems play a fundamental role in an economy by providing the mechanisms through which payments arising from transactions can be settled. The existing literature on the economics of payments systems is large but loosely organized, in that each model uses a distinct set-up and sometimes a distinct equilibrium concept.

Payments systems are typically characterized by some degree of tiering, with upstream firms (clearing agents) providing settlement accounts to downstream institutions that wish to clear and settle payments indirectly in these systems (indirect clearers).

The author explores a fundamental trade-off that occurs between settlement delay and intraday liquidity in the daily operation of large-value payment systems (LVPS), with specific application to Canada's Large Value Transfer System (LVTS).

The authors examine how the use of extreme value theory yields collateral requirements that are robust to extreme fluctuations in the market price of the asset used as collateral.

Operational events in the Large Value Transfer System (LVTS) almost always result in a disturbance of the regular flow of payments.

This paper provides a comprehensive overview of Canada’s Large Value Transfer System (LVTS).

Canada's Large Value Transfer System (LVTS) is designed to meet international risk-proofing standards at a minimum cost to participants in terms of collateral requirements.