International Capital Market Association and Pre-settlement risk: Difference between pages
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Pre-settlement risk is the risk that one party to a contract becomes insolvent before delivering its side of the contract. | |||
A | 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. | |||
== See also == | == See also == | ||
* [[ | * [[Credit risk]] | ||
* [[ | * [[Hedging]] | ||
*[[ | * [[Insolvency]] | ||
Revision as of 03:44, 19 May 2016
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.