Risk Terms

Counterparty Risk

Definition

What is Counterparty Risk?

The risk that the other party to a contract fails to perform.

Example in practice

A derivative gains value, but the dealer cannot make the payment.

Keep learning

The possibility of loss because broad market prices or rates move against an investment.

The possibility that a borrower or issuer will fail to make promised payments or suffer a downgrade.

The possibility that changing market interest rates will reduce an investment's value or income appeal.

A day on which relevant financial institutions and markets are open for normal processing.

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