Preparing Simulations in Large Value Payment Systems using Historical Data

Simulations in large value payment systems have become a common tool for stress scenario analyses, often using historical data. The reason for simulating is that disruptions in payment systems are not very common. Simulation of realistic scenarios requires adequate preparation. As part of the preparation, it is essential 1) to have a thorough understanding of the structure of the investigated market, 2) to potentially remove certain types of transactions, such as funding-related transactions (interbank loans), and 3) to understand how banks react to a shock. The financial crisis starting in the summer of 2007 caused several stressful events worldwide and provided insight into how banks behaved during these events.