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Counterparty

• Party on the other side of a trade or transaction.

 
 Embedded terms in definition
 Trade
 
 Referenced Terms
 Credit risk: The risk that an issuer of debt securities or a borrower may default on his obligations or that the payment may not be made on a negotiable instrument. Related: Default riskIs the risk related to Counterparty failure. It is a key concern for Over-the-Counter transactions. This compares to listed trades passing through a clearinghouse.Credit risk refers to the possibility that borrowers sometimes default on their promises.
The risk that an issuer of debt securities or a borrower may default on his obligations, or that payment may not be made on sale of a negotiable instrument. (See overnight delivery risk.)

 Fixed rate payer: In an interest rate swap the Counterparty who pays a fixed rate, usually in exchange for a floating-rate payment.

 Floating rate payer: In an interest rate swap, the Counterparty who pays a rate based on a reference rate, usually in exchange for a fixed-rate payment

 Forward: Is a market similar to futures in terms of deferred deliveries. However, notable differences include the lack of contract standardization, the lack of a central clearinghouse, the potential for substantial Counterparty risk, but it allows contractual term customization and deliveries at times, points and grades other than those listed for futures contracts. It is alsoused to refer to the bank currency market.

 Herstatt risk: The risk of loss in foreign exchange trading that one party will deliver foreign exchange but the Counterparty financial institution will fail to deliver its end of the contract. It is also referred to as settlement risk.

 
 Related Terms
 Counterparty risk

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