Delivery Risk

Definition of 'Delivery Risk'


The risk that a counterparty in a transaction may not be able to fulfill its side of the agreement by failing to deliver the underlying asset or the cash value of the contract.
Also called settlement risk.

In the foreign exchange context, delivery risk is also known as Herstatt risk, after the small German bank that failed to cover due obligations.

Investopedia explains 'Delivery Risk'


While delivery risk is relatively rare, the perception of this risk can be elevated during times of global financial strain, such as during and after the collapse of Lehman Brothers in September 2008. Since it is a bigger issue in over-the-counter trading, such as with bonds and currency markets, measures to mitigate this risk include settlement via clearing houses and mark-to-market measures.


Filed Under:

comments powered by Disqus
Hot Definitions
  1. Ascending Triangle

    A bullish chart pattern used in technical analysis that is easily recognizable by the distinct shape created by two trendlines. In an ascending triangle, one trendline is drawn horizontally at a level that has historically prevented the price from heading higher, while the second trendline connects a series of increasing troughs.
  2. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  3. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  4. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  5. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  6. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
Trading Center