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   Settlement Risk
   















 

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Settlement Risk

Related to credit risk but not identical, settlement risk is the risk that an expected settlement payment on an obligation will not be made on time. A common example involves bilateral obligations in which one party makes a required settlement payment and the counterparty does not. Settlement risk provides an important motivation to develop netting arrangements and other safeguards. Also called Delivery Risk, Herstatt Risk. See also Cross-Currency Settlement Risk, Daylight Risk Exposure, Fail, Multinet, Pre-Settlement Credit Risk.

For a full discussion of the various aspects of settlement risk, read "Key Risk Concepts: Settlement Risk"

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