The risk that a party will not pay while the counterparty is sending payment is called
A)wire transfer risk
B)payment risk
C)settlement risk
D)cross-border risk
E)none of the above

Question

Quizplus · Accepted Answer

Settlement risk, also known as Herstatt risk, is the risk that one party will fulfill its obligation to deliver securities or cash, while the counterparty fails to do so. It is usually most prevalent in cross-border transactions, as there may be differences in time zones or banking systems that can delay the settlement process. Settlement risk can be mitigated through the use of clearing houses and other risk management tools.

The Risk That a Party Will Not Pay While the Counterparty