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Herstatt Risk

   Also found in: Wikipedia 0.04 sec.
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.

Herstatt Risk
In foreign exchange, the risk that one of the counterparties, especially a financial institution, will fail to make delivery of the currency. See: Settlement risk.


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Indeed, finding a safe and efficient delivery-versus-payment mechanism that ensures the simultaneous settlement of payments in two or more currencies and virtually eliminates Herstatt risk remains both a goal and a challenge for market participants.
Herstatt risk arises in part because the operating schedules of national payment systems are not synchronized.
 
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