risk that a central bank will not make the necessary transfer of foreign currency to complete a currency settlement is known as ________ risk.

Question

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The risk that a central bank will not make the necessary transfer of foreign currency to complete a currency settlement is known as Herstatt risk. Herstatt risk is named after the German bank, Bankhaus Herstatt, which failed to deliver Deutsche marks to its counterparts in the United States after receiving dollars in a foreign exchange transaction in 1974. This risk can result in one party completing the transaction while the other fails to do so, leading to losses for the party that did fulfill their obligation.

Risk That a Central Bank Will Not Make the Necessary