How Does 'Settlement Risk' Manifest in a Two-Party Crypto Derivatives Trade? ▴ Learn

How Does ‘Settlement Risk’ Manifest in a Two-Party Crypto Derivatives Trade?

Settlement risk is the risk that one party in a trade will fail to deliver their obligation (the asset or cash) after the other party has already delivered theirs. In a two-party (bilateral) crypto derivatives trade, this risk is heightened by the lack of a CCP guarantee.

It manifests as the possibility of a counterparty default between trade execution and final settlement, especially if there is a delay in the process.

In Derivatives, How Does the Use of a Central Clearing Counterparty (CCP) Mitigate Counterparty Risk Similar to How the Blockchain Prevents Double-Spending?

What Are the Risks of Using Bilateral (Non-Cleared) Derivatives Compared to Centrally Cleared Ones?

What Is the Role of a Central Clearing House (CCP) in Mitigating Counterparty Risk?

What Is Counterparty Risk and Why Is It Higher in Forward Contracts?