Counterparty

In this article, We learn about "Counterparty ".Let's Go!

A Counterparty is the counterparty in a financial transaction. This means that both parties to a transaction can be called counterparties.

Concluding a contract with a counterparty creates the so-called counterparty credit risk.

Credit risk refers to the possibility that the counterparty may not be able to meet its obligations to successfully complete the transaction.

One of the most common counterparty risks is payment default, which is the inability to pay what is due.

This risk can often be eliminated by using CCP

.

This third-party intermediary assumes the credit risk of both parties to the transaction and determines what the counterparty needs to complete the transaction successfully.

Clearing houses, for example, are essential to greatly reduce counterparty risk since counterparties (buyers and suppliers of products) often do not know each other.

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