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From Lannquist,2020, p.6, 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, here) , these two terms are indistinguishable to me, mostly about default risk.

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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.

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  • $\begingroup$ 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. $\endgroup$ Nov 20, 2021 at 20:36
  • $\begingroup$ 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 $\endgroup$ Nov 20, 2021 at 20:37
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    $\begingroup$ @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 $\endgroup$
    – csilvia
    Nov 20, 2021 at 23:59
  • $\begingroup$ Ah now I see, thanks a lot @csilvia, thanks for your patience. $\endgroup$ Nov 21, 2021 at 0:02

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