What To Do about Bilateral Credit Limits in the LVTS When a Closure Is Anticipated: Risk versus Liquidity Sharing among LVTS Participants
The authors examine the effect of a trade-off between shared credit risk and liquidity efficiency, among participants in Tranche 2 of the Large Value Transfer System (LVTS T2), on their decisions to leave open, or close, their bilateral credit limits (BCLs) to a participant at risk of imminent closure. The authors' analysis considers a network of three banks, in a settlement system similar to the LVTS T2. Although it is widely believed that closure of one bank is imminent, the exact timing of the closure - during or after the settlement cycle - is uncertain. The other two banks face an "open or close" choice regarding their BCLs to the problem participant. Based on the expected net payoff of each choice, which includes the value of network externalities, the analysis shows that, when the expected credit loss is sufficiently low, an open-BCL pure-strategy Nash equilibrium can exist and can be Pareto efficient. This result dispels the generality of the frequent assertion that participants in the LVTS T2 will close their BCLs to a participant that is subject to imminent closure.
Liquidity Efficiency and Distribution in the LVTS: Non-Neutrality of System Changes under Network Asymmetry
The authors consider the liquidity efficiency of Tranche 2 of the Large Value Transfer System (LVTS T2) by examining, through an empirical analysis, some plausible strategic reactions of individual participants to a systemwide shock to available liquidity in the system. The network structure of the LVTS T2 is found to be asymmetric in terms of the patterns of out-payment flows. It is composed of three subgroups, in which participants within a subgroup are more strongly linked with each other than with participants in other subgroups. Three possible network equilibria are proposed. The equilibria are defined in terms of participant-specific collateral needs and out-payment delays, and result from different relative cost structures involving collateral costs, queuing costs, and payment delay penalties. Each of the conjectural equilibria relate to a dominant strategy for at least those participants most central in the network with respect to liquidity transfer adopted network-wide as a common strategy.
The history and development of the dental surveyor--Part III.
The dental surveyor is an indispensable instrument capable of performing a number of prosthodontic procedures. Surprisingly, the technique of surveying casts as part of the treatment planning procedure did not emerge until early in the twentieth century. This article reviews the origins and early use of the dental surveyor. It includes features common to all surveyors as well as the principal uses of these instruments.