IDEAS home Printed from https://ideas.repec.org/a/rsk/journ7/2370939.html
   My bibliography  Save this article

Analysis of the use and impact of limits

Author

Listed:
  • Alexander Müller
  • Martin Diehl

Abstract

ABSTRACT The analysis of the use of limits reveals that they are rarely used and not actively managed. In quantifying the different impacts of limits on the performance of TARGET2 via the simulation of various stress scenarios, this paper contributes to the overall assessment of limits. The paper quantifies the first-round effect of limits (longer queues and more delay) and the partially offsetting second-round effect, which is caused by the liquidity redirection of effective limits. It is shown that the net effect is significantly smaller in the case of a more severe stress scenario. Moreover, it can be proven that in applying limits to late payers the burden of additional delay is systematically shifted toward the late payers. This clearly benefits the limit setters and punishes free riders.

Suggested Citation

  • Alexander Müller & Martin Diehl, . "Analysis of the use and impact of limits," Journal of Financial Market Infrastructures, Journal of Financial Market Infrastructures.
    • Handle: RePEc:rsk:journ7:2370939
    as

    Download full text from publisher

    File URL: https://www.risk.net/journal-of-financial-market-infrastructures/2370939/analysis-of-the-use-and-impact-of-limits
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rsk:journ7:2370939. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thomas Paine (email available below). General contact details of provider: https://www.risk.net/journal-of-financial-market-infrastructures .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.