The formula for the standard deviation of cash held by the centralized depository for N affiliates is

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The formula for the standard deviation of cash held by the centralized depository for N affiliates is based on the assumption that interaffiliate cash flows have a correlation coefficient of 0. This means that cash flows between affiliates are not related, and therefore do not affect the overall standard deviation of cash held by the centralized depository. If interaffiliate cash flows had a correlation coefficient of -1 or +1, this would indicate a strong negative or positive relationship between the cash flows and would affect the overall variability of cash held by the centralized depository.

The Formula for the Standard Deviation of Cash Held by the Centralized