Netting

Definition

  • The offsetting with a counter-party of financial obligations or payments one is owed with those one is entitled to receive, thus reducing the costs arising out of payment settlements. Netting is also used as a risk management tool to help counter-parties reduce their exposure to credit risk.

Synonyms
offsetting, spreading

Related Terms and Acronyms

  • Credit Risk Definition,
    • The risk of loss assumed under a financial contract that a borrower or a counter-party to a loan or other credit-related contract may default or fail to fulfill its obligations.
  • Exposure Definition,
    • How much liability an insurer takes on when they write an insurance policy.
  • Liabilities Definition,
    • A borrower's debts and legal obligations.
  • Risk Management Definition,
    • The methods used to identify, assess, and prioritize risk and the strategies used to manage them in the most effective and economical way possible.
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