Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/100786
Authors: 
Kahn, Charles M.
Roberds, William
Year of Publication: 
2000
Series/Report no.: 
Working Paper, Federal Reserve Bank of Atlanta 2000-15a
Abstract: 
Foreign exchange transactions are subject to a unique type of settlement risk. This risk ultimately stems from the difficulty of coordinating separate settlements in two different currencies. Settlement of foreign exchange transactions through the proposed CLS ("Continuous Linked Settlement") Bank has been discussed as a potential solution to this problem. This paper describes the CLS proposal and analyzes the incentives it places on banks engaged in foreign exchange transactions. The analysis shows that while settlement through the CLS Bank may represent an improvement over current arrangements, some important problems associated with foreign exchange settlements will remain.
Subjects: 
Risk
Payment systems
Foreign exchange
Document Type: 
Working Paper

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