Settlement Risk
/ˈsɛtlmənt rɪsk/
Definitions
- (n.) The risk that one party to a financial transaction will fail to deliver on the agreed terms, resulting in financial loss to the other party.
Settlement risk arises if the buyer pays but the seller does not transfer the securities.
- (n.) The risk in cross-border transactions due to time zone differences and legal system variations that may affect the completion of contract settlement.
Settlement risk is heightened in international trades because of differing banking hours and regulations.
Forms
- settlement risk
Related terms
See also
Commentary
Settlement risk is specifically associated with the completion phase of a transaction and differs from general credit risk by focusing on delivery failure rather than creditworthiness.
This glossary is for general informational and educational purposes only. Definitions are jurisdiction-agnostic but reflect terminology and concepts primarily drawn from English and American legal traditions. Nothing herein constitutes legal advice or creates a lawyer-client relationship. Users should consult qualified counsel for advice on specific matters or jurisdictions.