CFA Practice Question

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CFA Practice Question

Which risk is sometimes called Herstatt risk?

A. Credit risk
B. Liquidity risk
C. Settlement risk
Correct Answer: C

Settlement risk is the risk that a party to a trade fails to make payment even though it has been paid by its counterparty. Herstatt was the name of a German bank that failed in 1974 after receiving "overnight" payments and then defaulting.

User Contributed Comments 1

User Comment
paxtan this is actually from the notes #19 of the required reading.
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