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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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