Settlement risk: Difference between revisions
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The term '''Herstatt risk''' follows from a famous incident on [[June 26]], [[1974]], in which the [[Germany|german]] [[Herstatt bank]] was closed down on the last business day of its insolvent operations before the US business day began. As a result, many of the US creditors holding unsecured claims against the bank were left with unrecoverable debts. |
The term '''Herstatt risk''' follows from a famous incident on [[June 26]], [[1974]], in which the [[Germany|german]] [[Herstatt bank]] was closed down on the last business day of its insolvent operations before the US business day began. As a result, many of the US creditors holding unsecured claims against the bank were left with unrecoverable debts. |
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==For More Information== |
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*[http://www.riskglossary.com/link/settlement_risk.htm Settlement Risk] is an in-depth article. (riskglossary.com) |
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Revision as of 00:05, 6 December 2005
Settlement risk, also known as the Herstatt risk is the risk that a counterparty does not deliver security or its value in cash as per agreement when the security was traded after other counterparty or counterparties have delivered security or cash value as per the trade agreement.
The term Herstatt risk follows from a famous incident on June 26, 1974, in which the german Herstatt bank was closed down on the last business day of its insolvent operations before the US business day began. As a result, many of the US creditors holding unsecured claims against the bank were left with unrecoverable debts.
For More Information
- Settlement Risk is an in-depth article. (riskglossary.com)
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