Economics · Financial Risk Management
In financial counterparty risk management, settlement risk is most accurately described as the risk that:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1the credit rating of the counterparty is downgraded during the tenure of the derivative contract.
- 2a party performs its obligation under a contract but the counterparty fails to perform its obligation at the time of settlement.✓
- 3market prices will move unfavourably before the contract matures, affecting the collateral value.
- 4the counterparty will default well before the scheduled value date of the transaction.
Correct answer
a party performs its obligation under a contract but the counterparty fails to perform its obligation at the time of settlement.
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