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Herstatt risk

   Also found in: Wikipedia 0.06 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.
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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.
A primer on the settlement of payments in the United States by Young, Florence M. / Federal Reserve Bulletin
Herstatt risk arises in part because the operating schedules of national payment systems are not synchronized.
Clearing and payment systems: the role of the central bank by Summers, Bruce J. / Federal Reserve Bulletin
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