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What Is the Risk That DVP Is Designed to Eliminate?

DVP eliminates principal risk (Herstatt risk), which is the risk of delivering an asset without receiving the corresponding payment.
Greeks.Live13.11.25

What Is the Risk That DVP Is Designed to Eliminate?

DVP (Delivery Versus Payment) is specifically designed to eliminate principal risk (also known as Herstatt risk). Principal risk is the risk that one party in a transaction delivers the asset (or payment) but does not receive the corresponding payment (or asset) from the counterparty.

By ensuring the simultaneous exchange, DVP guarantees that neither party is exposed to the risk of losing the entire principal value of the transaction due to a counterparty default.

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