The risk of losing part or all of the principal of a financial asset.

It is the risk that the seller of a financial asset such as securities will not receive payment after delivery on its obligations. It may also refer to the risk that the buyer will pay, but not get the underlying assets delivered, either on time or if any. In such a situation, the full value of the securities or amounts paid/ transferred will be at risk.

Principal risk may also arise from any potential loss of the full value (or contractual rights) involved in a transaction, typically as a result of the default or insolvency of a counterparty.