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elearning > Settlement risk

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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.

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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

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