During a swap,the risk of one party not forwarding its payment while the other party does fulfil its payment obligation is called:
A) Herstatt risk.
B) swap risk.
C) settlement risk.
D) repayment risk.

Question

Quizplus · Accepted Answer

Settlement risk refers to the risk faced by one party in a swap that the other party may not fulfil their payment obligation, leaving the first party vulnerable to losses. This risk arises due to the time lag between the two parties fulfilling their obligations, meaning there is a chance that one party may default before the other.

During a Swap,the Risk of One Party Not Forwarding Its