When is your settlement risk greatest on a spot FX deal?
A) Today
B) Tomorrow
C) After you make an irrevocable payment
D) On the spot value date

Question

Quizplus · Accepted Answer

Settlement risk is the risk that occurs when one counterparty fulfills their obligation under a contract but the other counterparty fails to do so. Settlement risk is greatest when a payment is irrevocable, as there is no way to reverse the payment if the other party fails to perform their obligation. Therefore, the correct answer is C - after you make an irrevocable payment.

When Is Your Settlement Risk Greatest on a Spot FX