Join Mailing List

For latest news and information about Treasury and Financial Markets, enter your details below:

elearning > Settlement risk

Print Preview Send to a Friend Share

Learn about the following:

What settlement risk is. Why it is also called Herstatt Risk. How foreign exchange markets reduce settlement risk. How securities markets reduce settlement risk.

Register for free or login to view the full publication

Course Summary

Settlement risk menuSettlement risk HerstattSettlement risk foreign exchange

Settlement risk CLSSettlement risk CLS 2Settlement risk bonds

  • 30 minutes
  • 7 question multiple choice test
  • What settlement risk is
  • Why it is also called "Herstatt risk"
  • How foreign exchange markets reduce settlement risk
  • How securities markets reduce settlement risk

Settlement risk - the details

1. Bankhaus Herstatt

  • What happened in this classic case
  • Small probability but large outcome
  • How settlement risk affects all deals
  • Reducing settlement risk
  • Obligation netting
  • Limits

2. Foreign exchange

  • Continuously linked settlement
  • Obligation to pay
  • Pre-funding
  • Payment versus payment
  • Why it reduces settlement risk

3. Securities

  • Delivery versus payment
  • What it is and how it works
  • Gross settlement
  • Gross securities and net cash
  • Net cash and net securities
  • Why DVP reduces settlement risk

4. Summary

5. Test

Related Documents

Registration Requiredelearning > Trade capture 100% relevant

Learn about the following: Why capturing trade information on a timely basis is important. How front office errors occur. Their unintended consequences. How errors that lead to trade re-booking can be reduced. The importance of enrichment. Why static data should be clean and verified.


Free to ViewTraining Courses > Balance Sheet Risk Management 38% relevant


Registration RequiredValue at Risk (VAR) Guide 28% relevant


Registration RequiredMarket Guides > Gap reports - how do you use them? 28% relevant

14th October 2009

Gap reports show you the interest rate risk you are running in your balance sheet. They put the assets and liabilities into time buckets in accordance with their interest rate repricing. From this simple approach you can obtain a table or graph of the risk being run. This normally includes a profit and loss figure that results from moving the yield curve. Gap limits are also applied in order to keep the interest rate exposure within risk tolerence. Gap reports aren't new; they are widely used and have both strengths and weaknesses. Let's find out more.


Free to ViewTraining Courses > Value at Risk 28% relevant


Free to ViewRegulation > Does liquidity risk overshadow market risk? 28% relevant

23rd January 2010

In a world where regulators are focusing on liquidity and capital it's easy to overlook market risk. In many firms this means interest rate exposure. In the UK with Bank Rate at an all time low it's tempting to think that hedging fixed rate assets is just a waste of money. After all why pay 3.25% on a 5 year swap when 3 month Libor is only 51 basis points? Surely matching the interest basis on assets and liabilities ends up costing you 274 bps doesn't it?