replacement cost risk
This query is : Resolved
bhargava sarma
(Querist)
18 June 2011
My question is
What is replacement cost risk?
can u please explain this with an example.
What is replacement cost risk?
can u please explain this with an example.
CA Harish Suwalka
(Expert)
19 June 2011
Replacement Risk
What Does It Mean?
What Does Replacement Risk Mean?
The risk that a contract holder will know that the counterparty will be unable to meet the terms of a contract, creating the need for a replacement contract.
Also known as "replacement-cost risk".
Investopedia Says
Investopedia explains Replacement Risk
For example, if a counterparty in an agreement fails to fulfill its contractual obligation, you will have to replace whatever it was the counterparty was supposed to deliver (e.g. an interest rate, a stock, a commodity, etc). Of course, there is a good chance that you won't be able to do this at the same price because the market will have moved since the contract was created.
link :https://www.investopedia.com/terms/r/replacementrisk.asp
What Does It Mean?
What Does Replacement Risk Mean?
The risk that a contract holder will know that the counterparty will be unable to meet the terms of a contract, creating the need for a replacement contract.
Also known as "replacement-cost risk".
Investopedia Says
Investopedia explains Replacement Risk
For example, if a counterparty in an agreement fails to fulfill its contractual obligation, you will have to replace whatever it was the counterparty was supposed to deliver (e.g. an interest rate, a stock, a commodity, etc). Of course, there is a good chance that you won't be able to do this at the same price because the market will have moved since the contract was created.
link :https://www.investopedia.com/terms/r/replacementrisk.asp
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