The document discusses a model of settlement risk in a real-time gross settlement (RTGS) system. In the model: 1) Banks must decide whether to settle payments to counterparties or default, based on the value of settling versus defaulting given their beliefs about other banks' actions. 2) Banks update their beliefs over multiple rounds based on the history of actions, using a recency-weighted rule. 3) The model can converge to an equilibrium where all banks settle or a mixed equilibrium, depending on factors like the amount of money in the system, the distribution of money among banks, and the structure of the bank network.