Counterparty Risk
/ˌka-nəˈtɛr-pɑr-ti rɪsk/
Definitions
- (n.) The risk that one party to a contract or financial transaction will default on its obligations, causing financial loss to the other party.
The bank assessed counterparty risk before entering the derivatives agreement.
Related terms
See also
Commentary
Counterparty risk is crucial in drafting and negotiating financial contracts and derivatives, requiring clear terms on default and remedies.
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