Investopedia

Continue to Site »

Delivery Risk

Filed Under »
Dictionary Says

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 Says

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.

Articles Of Interest

  1.

    What is the difference between forward and futures contracts?

    Fundamentally, forward and futures contracts have the same function: both types of contracts allow people to buy or sell a specific type of asset at a specific time at a given price. However, ...

  2. Why do futures' prices converge upon spot prices during the delivery month?

    It's a fairly safe bet that as the delivery month of a futures contract approaches, the future's price will generally inch toward or even come to equal the spot price as time progresses. This ...

  3. The Credit Crisis And The Carry Trade

    When boom times turned to bust, these trades proved devastating for traders and the broader markets.

  4. A New Plan To Prevent Future Bailouts

    This new and innovative plan by the FDIC could help the government avoid the next bailout.

  5. How To Manage Your Company Stock

    If you have company stock, it can be hard to know what to do with it. Here's what you should know.

  6. Why Money Market Funds Break The Buck

    These funds are noted for their safety in a rough market. Read on to find out why.

  7. 10 Legal Business Practices Of Dubious Ethics

    Being aware of these unscrupulous methods can help you avoid them as best you can.

  8. What Is Servant Leadership?

    Robert Greenleaf developed the concept of servant leadership, and many believe it is the key to avoiding greed-based company activity.

  9. A Guide To Faith-Based Investing

    If you've wondered how to invest in a way that reflects your religious belief, we've got the answers for you.

  10. Dodd-Frank's Consequences

    We look at the true fallout of the Dodd-Frank Regulatory Reform Bill.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  2. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  3. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.

  4. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.

  5. Angelina Jolie Stock Index

    An index made up of a selection of stocks from companies associated with actress Angela Jolie.

  6. Consequential Loss

    The amount of loss incurred as a result of being unable to use business property or equipment.
Trading Center