Mismatch Risk

Mismatch Risk
1) A category of risk that refers to the possibility that a swap dealer will be unable to find a suitable counterparty for a swap transaction for which it is acting as an intermediary.

2) The risk that an investor has chosen investments that are not suitable for his or her circumstances.

1) A number of different factors can make it difficult for a swap bank to find a counterparty for a swap transaction. For example, wanting to participate in a swap with a very large notional principal may limit the number of available counterparties.

2) A mismatch between investment type and investment horizon can be a source of mismatch risk. For example, mismatch risk would exist in a situation where an investor with a short investment horizon (such as one who is near retirement) invests heavily in speculative hi-tech stock. Typically, investors with short investment horizons should focus on less speculative investments such as fixed income securities and blue chip equities.


Investment dictionary. . 2012.

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  • term liquidity risk — See liquidity mismatch or liquidity mismatch risk …   Financial and business terms

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