<abstract xmlns="http://www.w3.org/1999/xhtml"><p>Based on the payments and settlement system, the influence of the topology of capital flow networks on the extra short-term liquidity demand is investigated. Through modelling the circulating mechanism of liquidity in a network, its different influencing factors are analysed. The factors relating to the strength of nodes and leakage of liquidity that influences the liquidity demands of real-time settlements are studied from the perspective of both the system and members, using different simulation methods. The results show that strength will lead the member’s liquidity demand to increase but the strength distribution will lead the system’s liquidity demand to decrease, in cases with no leakage effect or unchanged leakage effect. The liquidity demand of the entire system is positive compared to the amount of leakage effect but uncorrelated to the distribution of the leakage effect among members, if the effect of strength distribution is unchanged. If the effects of strength, strength distribution and leakage are changed together, the latter is the dominant factor that influences the liquidity demand of both system and members. The above findings are useful for the management and supervision of short-term liquidity demand in complex financial systems, and for liquidity risk management and liquidity rescue policymaking.</p></abstract>

Based on the payments and settlement system, the influence of the topology of capital flow networks on the extra short-term liquidity demand is investigated. Through modelling the circulating mechanism of liquidity in a network, its different influencing factors are analysed. The factors relating to the strength of nodes and leakage of liquidity that influences the liquidity demands of real-time settlements are studied from the perspective of both the system and members, using different simulation methods. The results show that strength will lead the member’s liquidity demand to increase but the strength distribution will lead the system’s liquidity demand to decrease, in cases with no leakage effect or unchanged leakage effect. The liquidity demand of the entire system is positive compared to the amount of leakage effect but uncorrelated to the distribution of the leakage effect among members, if the effect of strength distribution is unchanged. If the effects of strength, strength distribution and leakage are changed together, the latter is the dominant factor that influences the liquidity demand of both system and members. The above findings are useful for the management and supervision of short-term liquidity demand in complex financial systems, and for liquidity risk management and liquidity rescue policymaking.

Topology of Complex Networks and Demand of Intraday Liquidity: Based on the Real-Time Gross Settlement System

Southwestern University of Finance and Economics

Central European Economic Journal

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Based on the payments and settlement system, the influence of the topology of capital flow networks on the extra short-term liquidity demand is investigated....

Topology of Complex Networks and Demand of Intraday Liquidity: Based on the Real-Time Gross Settlement System

Published Online: Mar 21, 2018

Page range: 50 - 61

DOI: https://doi.org/10.1515/ceej-2017-0010

Keywords
network structure, intraday liquidity, real-time settlement, liquidity management

© 2017 M. Tong, Y. He

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Topology of Complex Networks and Demand of Intraday Liquidity: Based on the Real-Time Gross Settlement System

Published Online: Mar 21, 2018

Page range: 50 - 61

DOI: https://doi.org/10.1515/ceej-2017-0010

Keywordsnetwork structure, intraday liquidity, real-time settlement, liquidity management

© 2017 M. Tong, Y. He

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
network structure, intraday liquidity, real-time settlement, liquidity management