Herstatt risk

The risk of loss in foreign exchange trading that one party will deliver foreign exchange but the counterparty financial institution will fail to deliver its end of the contract. It is also referred to as settlement risk. The New York Times Financial Glossary

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   The risk that when dealing with an overseas client a bank may not be recover its funds if the counterparty defaults on its payment obligation. Named for the failed German bank Bankhaus Herstatt in 1974. Also called Cross-currency Settlement Risk.

Financial and business terms. 2012.

Look at other dictionaries:

  • herstatt risk — The risk of loss in foreign exchange trading that one party will deliver foreign exchange but the counterparty financial institution will fail to complete its end of the contract. This is also referred to as settlement risk. Bloomberg Financial… …   Financial and business terms

  • Herstatt risk — See settlement risk …   Big dictionary of business and management

  • РИСК ГЕРСТАТТ - РИСК ПРИ ПЕРЕКРЕСТНЫХ ВАЛЮТНЫХ СДЕЛКАХ (HERSTATT RISK (CROSS-CURRENCY SETTLEMENT RISK)) — риск, относящийся к взаиморасчетам по контрактам, связанным с покупкой иностранной валюты, когда одна из сторон выплачивает сумму в какой либо валюте до получения оплаты от другой стороны в результате разницы во временных поясах между пунктами… …   Словарь понятий и терминов, сформулированных в нормативных документах российского законодательства

  • Herstatt Bank — is a privately owned bank in the German city of Cologne. It went bankrupt on 26 June, 1974 in a famous incident illustrating settlement risk in international finance.On June 26, 1974, German regulators forced the troubled Bank Herstatt into… …   Wikipedia

  • Settlement risk — is the risk that a counterparty does not deliver a security or its value in cash as per agreement when the security was traded after the other counterparty or counterparties have already delivered security or cash value as per the trade agreement …   Wikipedia

  • Settlement Risk — The risk that one party will fail to deliver the terms of a contract with another party at the time of settlement. Settlement risk can be the risk associated with default at settlement and any timing differences in settlement between the two… …   Investment dictionary

  • Cross-Currency Settlement Risk — A type of settlement risk in which a party involved in a foreign exchange transaction remits the currency it has sold, but does not receive the currency it has bought. In cross currency settlement risk, the full amount of the currency purchased… …   Investment dictionary

  • Delivery Risk — The risk that a counterparty in a transaction may not be able to fulfill its side of the agreement by failing to deliver the underlying asset or the cash value of the contract. Also called settlement risk. In the foreign exchange context,… …   Investment dictionary

  • settlement risk — The risk that a transaction will not be settled as expected (i. e. that an agreed delivery or payment will not be made). It is sometimes referred to as Herstatt risk after a bank of that name, which failed to honour its foreign exchange… …   Big dictionary of business and management

  • Cross Currency Settlement Risk —    ► See Herstatt Risk …   Financial and business terms

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