Herstatt risk

Definition:

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.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Currency Exchange Risk

Uncertainty about the rate at which revenues or costs denominated in one currency can be converted into another currency.

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