Principal risk - Financial definition
Financial acronyms
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Concise definition of the term principal risk
Principal risk is the risk of losing the full value involved in a transaction, typically as a result of the default or insolvency of the counterparty.
Comprehensive definition of the term principal risk
Principal risk is one of the largest potential sources of systemic risk, which means that the inability of one institution to meet its obligations will cause other institutions to fail to meet theirs, ultimately threatening the stability of the payment or settlement systems, and ultimately the stability of the financial system.