CTP(CD) Canadian Exam key terms

A settlement mechanism that ensures the final transfer of one currency occurs only if the final transfer of another currency also occurs, eliminating principal risk in foreign exchange settlement between counterparties.

The risk that one party delivers a currency to a counterparty before receiving the counter-currency, leaving it exposed if the counterparty fails. Named after the 1974 failure of Bankhaus Herstatt.

Continuous Linked Settlement is a multilateral system that settles matched FX transactions on a payment-versus-payment basis across many currencies, reducing settlement exposure between member banks.

An arrangement in which one bank holds accounts and provides payment services in a foreign country for another bank, enabling cross-border payments, trade finance and access to local clearing systems.

A bank's account held in a foreign currency with a bank abroad. From the account holder's perspective it is 'our account with you' and is used to settle foreign currency obligations.

An account that a correspondent bank holds for another bank in the correspondent's own currency and jurisdiction. From the correspondent's view it is 'your account with us'.

A structured financial telecommunication in the SWIFT messaging standard, such as MT103 for customer transfers or MT202 for bank-to-bank cover payments, used to instruct cross-border payments.

An international open standard for electronic financial messaging that uses rich, structured XML data, replacing legacy formats such as SWIFT MT messages for payments and reporting.

An electronic instruction to move funds between bank accounts, typically through a payment network. Domestic wires may settle same day; international wires pass through correspondent chains.

A batch-processing payment network that clears and settles large volumes of low-value electronic debits and credits, such as payroll and bill payments, usually on a next-day cycle.

A central bank payment system that settles each transfer individually and immediately in central bank money, used for large-value and time-critical payments.

The risk that an entity cannot meet payment obligations when due without incurring unacceptable losses, for example because funds are tied up or timing mismatches arise in settlement.

Funds available to a participant during the business day to make payments before end-of-day settlement, often provided through central bank credit lines or collateralized facilities.

The risk that a party to a financial transaction fails to meet its obligations before final settlement, causing the other party to suffer a loss or replace the transaction at a worse price.

The risk that a transaction fails to settle as expected because one party does not deliver the asset or funds, potentially leaving the other party exposed to market and replacement costs.

The amount a party could lose if a counterparty defaults, measured as the current replacement cost plus potential future exposure over the remaining life of the transaction.

The risk of loss arising from a borrower or counterparty failing to repay or perform according to agreed terms, assessed through ratings, financial analysis and collateral.

The process of identifying, valuing, margining and transferring assets pledged to secure obligations, including haircuts, eligibility rules and daily margin calls.

A statistical estimate of the maximum expected loss on a portfolio over a given horizon at a stated confidence level, based on historical or simulated return distributions.

A risk technique that applies severe but plausible scenarios, such as rate shocks or currency crises, to measure potential losses and assess capital and liquidity adequacy.

An evaluation of how a portfolio or treasury position would perform under specific hypothetical events, used alongside statistical measures to capture tail risks and non-linear effects.

The risk of loss from movements in market prices such as interest rates, foreign exchange rates, equity prices and commodity prices affecting trading or balance sheet positions.

The exposure of earnings or economic value to changes in interest rates, often measured through gap analysis, duration and repricing schedules for assets and liabilities.

The difference between the duration of assets and the duration of liabilities, adjusted for leverage, indicating how sensitive an institution's equity value is to rate changes.

The sensitivity of financial results or value to currency movements, categorized as transaction, translation and economic exposure, each managed with different hedging tools.

A binding agreement to exchange a specified amount of currency at a future date and rate. Used to hedge known exposures; traded over the counter with counterparty risk.

An agreement to exchange principal and interest payments in two currencies over a set period, often used to obtain cheaper funding in a foreign currency or hedge long-dated exposure.

A derivative in which two parties exchange fixed and floating interest payments on a notional principal, used to manage repricing risk or alter the cost profile of debt.

The process of sweeping balances from multiple operating accounts into a central account to pool funds, reduce idle cash and improve interest earnings or offset overdrafts.

A cash management arrangement in which balances across accounts are combined notionally to calculate interest, without physically transferring funds between the participating accounts.

An operating account that is funded only as needed to cover disbursements and swept to zero at day end, concentrating surplus cash in a master account automatically.

A centralized unit that processes payments on behalf of an organization's subsidiaries and business units, standardizing formats, controls and bank connectivity.

A centralized treasury structure that manages cash, funding and FX for group entities, treating internal units as customers and reducing reliance on external banking relationships.

The management of current assets and liabilities, including receivables, payables and inventory, to ensure sufficient liquidity while minimizing the cost of holding funds.

The number of days between paying suppliers and collecting from customers, calculated as days inventory plus days receivable minus days payable, indicating working capital efficiency.

Software that centralizes cash positioning, payments, bank connectivity, debt and FX management, and reporting, replacing spreadsheets with automated controls and audit trails.

The automated end-to-end handling of a transaction from capture through settlement without manual re-keying, reducing errors, cost and processing time.

An integrated software platform that manages core business functions such as accounting, procurement and inventory, often interfacing with treasury systems for cash and payment data.

A direct, often dedicated electronic link between a company's treasury or ERP system and a bank's payment or reporting platform, enabling secure file transfer without a portal.