- 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.
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.