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    Question

    A bank has failed to meet its obligation on account of a

    payment on due date due to its incapacity to pay. What kind of risk it is?
    A Gap risk Correct Answer Incorrect Answer
    B Liquidity risk Correct Answer Incorrect Answer
    C Settlement risk Correct Answer Incorrect Answer
    D Payment risk Correct Answer Incorrect Answer
    E Collateral risk Correct Answer Incorrect Answer

    Solution

    Settlement risk is the possibility that one or more parties will fail to deliver on the terms of a contract at the agreed-upon time. Settlement risk is a type of counterparty risk associated with default risk, as well as with timing differences between parties.

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