Abstract
The simulation technique provides a new means for analysing complex interdependencies in payment and securities settlement processing. The Bank of Finland has developed a payment and settlement system simulator (BoF-PSS2) that can be used for constructing simulation models of payment and securities settlement systems.This paper describes the main elements of payment and settlement systems (system structures, interdependencies, processing steps, liquidity consumption, cost and risk dimensions) and how these can be treated in simulation studies.It gives also examples on how these elements have been incorporated in the simulator, as well as an overview of the structure and the features of the BoF-PSS2 simulator. Key words: simulations, simulator, payment systems, clearing/settlement, and liquidity
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