<p>Investopedia explains the difference clearly:</p>
<blockquote>
<p>What Is Settlement Risk? Settlement risk is the possibility that <strong>one or more parties will fail to deliver on the terms of a contract</strong> at the <strong>agreed-upon time</strong>.</p>
</blockquote>
<blockquote>
<p>Default Risk: Default risk is the possibility that <strong>one of the parties fails to deliver on a contract entirely.</strong></p>
</blockquote>
<p>I don't think it can be explained more clearly than that.</p>

CC BY-SA 4.0
2021-11-20T20:36:05.243Z
Thanks a heap. And sorry for any inconvenient. I did edit the question. Could you please help me to sort it out. Thank you in advance.
Phil Nguyen
CC BY-SA 4.0
2021-11-20T20:37:47.917Z
And even as above, the difference between Settlement Risk and Default risk is still not really clear to me. I still cannot separate the settlement risk from default risk. Is there any example to make it more clear? Heaps of thanks
Phil Nguyen
CC BY-SA 4.0
2021-11-20T23:59:36.920Z
@Louise I dont understand how you can get even more intuitive here. Ok let me give you example maybe that will help you. SR: you owe me 100 dollars payable 30.12.2021 There is risk that you will not pay on time and pay 100 dollars at 15.1.2022. DR: there is risk I will never see full 100 dollars again you don't pay at all or pay only portion of it
csilvia
CC BY-SA 4.0
2021-11-21T00:02:20.553Z
Ah now I see, thanks a lot @csilvia, thanks for your patience.
Phil Nguyen
CC BY-SA 4.0
2021-11-20T16:49:14.433Z
2021-11-20T16:49:14.433Z
csilvia
<p>From <a href="https://www.mendeley.com/catalogue/bab1888b-3b36-318e-8d21-153b5f0bd5e5/?utm_source=desktop&amp;utm_medium=1.19.8&amp;utm_campaign=open_catalog&amp;userDocumentId=%7B1ed7fa60-0df9-369d-85c4-5cf5cb034eea%7D" rel="nofollow noreferrer">Lannquist,2020, p.6</a>, the wholesale Central Bank Digital Currency (CBDC) could reduce <strong>settlement risk</strong> and <strong>counterparty risks</strong>.</p>
<p>I am wondering what is the intuitive difference between these two risks? From Investopedia( <a href="https://www.investopedia.com/terms/s/settlementrisk.asp" rel="nofollow noreferrer">here</a>, <a href="https://www.investopedia.com/terms/c/counterpartyrisk.asp" rel="nofollow noreferrer">here</a>) , these two terms are indistinguishable to me, mostly about default risk.</p>

<risk>
What are the difference between "settlement risk" and "counterparty risk"
Phil Nguyen
# What are the difference between "settlement risk" and "counterparty risk"

(Asked by: username_0 on 2021-11-20)

From [Lannquist,2020, p.6](https://www.mendeley.com/catalogue/bab1888b-3b36-318e-8d21-153b5f0bd5e5/?utm_source=desktop&utm_medium=1.19.8&utm_campaign=open_catalog&userDocumentId=%7B1ed7fa60-0df9-369d-85c4-5cf5cb034eea%7D), the wholesale Central Bank Digital Currency (CBDC) could reduce **settlement risk** and **counterparty risks**.

I am wondering what is the intuitive difference between these two risks? From Investopedia( [here](https://www.investopedia.com/terms/s/settlementrisk.asp), [here](https://www.investopedia.com/terms/c/counterpartyrisk.asp)) , these two terms are indistinguishable to me, mostly about default risk.

**Tags:** risk

---

## 1 answers

### Answer by username_1 on 2021-11-20. Score: 2 | Accepted answer

Investopedia explains the difference clearly:

> What Is Settlement Risk? 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**.

> Default Risk: Default risk is the possibility that **one of the parties fails to deliver on a contract entirely.**

I don't think it can be explained more clearly than that.

> **Comments:**
> **username_0**: Thanks a heap. And sorry for any inconvenient. I did edit the question. Could you please help me to sort it out. Thank you in advance.  
> **username_0**: And even as above, the difference between Settlement Risk and Default risk is still not really clear to me. I still cannot separate the settlement risk from default risk. Is there any example to make it more clear? Heaps of thanks  
> **username_1**: @Louise I dont understand how you can get even more intuitive here. Ok let me give you example maybe that will help you. SR: you owe me 100 dollars payable 30.12.2021 There is risk that you will not pay on time and pay 100 dollars at 15.1.2022. DR: there is risk I will never see full 100 dollars again you don't pay at all or pay only portion of it  
> **username_0**: Ah now I see, thanks a lot @csilvia, thanks for your patience.  

---

