Market participants should, where activity justifies it, aim to reduce settlement and related credit risk on currency transactions by:
A) Establishing realistic daylight limits for counter
B) Monitoring all payments to counterparties who are
C) Establishing legally binding bilateral netting ag
D) Seeking pre-payment.

Question

Quizplus · Accepted Answer

Establishing legally binding bilateral netting agreements can greatly reduce settlement and credit risk on currency transactions by allowing market participants to offset their obligations with each other. This helps to minimize the amount of actual currency that needs to be exchanged and simplifies the settlement process, reducing the potential for errors and delays. While the other options may also help to mitigate risk, they are not as effective as netting agreements in reducing settlement and credit risk.

Market Participants Should, Where Activity Justifies It, Aim to Reduce