Investor Glossary-counterparty riskInvestor Glossary-counterparty riskInvestor Glossary-counterparty riskInvestor Glossary-counterparty riskInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Counterparty Risk

The HTML to link to this page
 

Counterparty risk refers to the risk of default of one party in a particular transaction. Credit ratings can be used to evaluate counterparty risk. For example, a party with a AAA credit rating represents a lower counterparty risk than a party with B credit rating. The lower the counterparty risk, the lower a particular product or commodity will be priced in a transaction. Indeed, although counterparty risk cannot be precisely quantified, in pricing a transaction or an investment product, a counterparty risk premium is often included to reflect the cost of added risk taken by the creditor. Collateral requirement provisions can also be included in transactions to decrease a creditor's exposure due to counterparty risk. Counterparty risk can also be mitigated by using a credit derivative such as a credit default swap. Another term for counterparty risk is default risk.



Rate this Counterparty Risk definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: 1035 exchange, phantom income, command economy, diluted share, LIBOR, per diem, ex-dividend date, debt service coverage, cancelled check, Zero Cost Collar, dividends payable, implied volatility, 1031 exchange, labor relations, 144a, covered put, irrevocable trust, class C shares, quality assurance, liquidity ratio, annual return, deferred tax, margin rate, reverse mortgage, deferred revenue, inflation, stock market close, limit order, retained earnings, VIX, current ratio, FTSE, Key Rate Duration, balance sheet, APR, required rate of return, stock split, FICO score, 401a, minority interest, open position, real GDP, option premium, wholly-owned subsidiary, risk management, ex-dividend, in escrow, average price per share, EBITDA


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use