What is settlement risk in FX?
A) The risk of failure of a payments or settlement system
B) The risk that only one side of an exchange of currencies will be made
C) The risk of payments 'gridlock' in a real-time gross settlement system
D) The risk that default by a counterparty before the value date means you have to replace the defaulted deal at a worse rate

Question

Quizplus · Accepted Answer

Settlement risk in FX refers to the risk that one party will deliver the currency it sold but not receive the currency it bought, leading to a loss. This is also known as "Herstatt risk."

What Is Settlement Risk in FX