Pre-settlement risk: Difference between revisions
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For treasurers it is vital that hedging counterparties remain solvent for the duration of the hedging contract – otherwise the hedge evaporates. | For treasurers it is vital that hedging counterparties remain solvent for the duration of the hedging contract – otherwise the hedge evaporates. | ||
A similar risk occurs in commercial contracts. Customers may become insolvent before paying for goods, and supplier insolvency may threaten production schedules. | A similar risk occurs in commercial contracts. | ||
Customers may become insolvent before paying for goods, and supplier insolvency may threaten production schedules. | |||
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* [[Hedging]] | * [[Hedging]] | ||
* [[Insolvency]] | * [[Insolvency]] | ||
[[Category:Identify_and_assess_risks]] | |||
Latest revision as of 07:04, 2 July 2022
Pre-settlement risk is the risk that one party to a contract becomes insolvent before delivering its side of the contract.
For treasurers it is vital that hedging counterparties remain solvent for the duration of the hedging contract – otherwise the hedge evaporates.
A similar risk occurs in commercial contracts.
Customers may become insolvent before paying for goods, and supplier insolvency may threaten production schedules.
