Risk Terms
Counterparty Risk
Definition
What is Counterparty Risk?
The risk that the other party to a contract fails to perform.
Example in practice
How This Looks in Practice
A derivativeA contract whose value depends on an underlying asset, rate, index, or event. gains value, but the dealer cannot make the payment.
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Related Terms
Risk Terms
Market Risk
The possibility of loss because broad market prices or rates move against an investment.
Risk TermsCredit Risk
The possibility that a borrower or issuer will fail to make promised payments or suffer a downgrade.
Risk TermsInterest-Rate Risk
The possibility that changing market interest rates will reduce an investment's value or income appeal.
MiscellaneousBusiness Day
A day on which relevant financial institutions and markets are open for normal processing.