Counterparty

Dictionary Says

Definition of 'Counterparty'

The other party that participates in a financial transaction. Every transaction must have a counterparty in order for the transaction to go through. More specifically, every buyer of an asset must be paired up with a seller that is willing to sell and vice versa.
Investopedia Says

Investopedia explains 'Counterparty'

All trades require some sort of counterparty. For example, the counterparty to the option buyer would be the option writer. One of the risks involved in any transaction is counterparty risk, which is the risk that the counterparty will be unable to fulfill his or her duties. However, in many financial transactions the counterparty is unknown.

Related Definitions

  • Counterparty Risk

    The risk to each party of a contract that the counterparty will not live up to its contractual obligations. Counterparty risk as a risk to both parties and should be considered when ...
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  • Default

    1. The failure to promptly pay interest or principal when due. Default occurs when a debtor is unable to meet the legal obligation of debt repayment. Borrowers may default when they are ...
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  • Risk

    The chance that an investment's actual return will be different than expected. Risk includes the possibility of losing some or all of the original investment. Different versions of risk ...
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    • Transaction

      An agreement between a buyer and a seller for the exchange of goods or services for payment.
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    • Trade

      A basic economic concept that involves multiple parties participating in the voluntary negotiation and then the exchange of one's goods and services for desired goods and services that ...
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    • Derivative

      A security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by ...
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    • Bank Endorsement

      An endorsement by a bank for a negotiable instrument, such as a banker's acceptance or time draft, that assures the counterparty that the bank will stand behind the obligations of the ...
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    • Clearing House

      An agency or separate corporation of a futures exchange responsible for settling trading accounts, clearing trades, collecting and maintaining margin monies, regulating delivery and ...
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    • Cross-Currency Settlement Risk

      A type of settlement risk in which a party involved in a foreign exchange transaction remits the currency it has sold, but does not receive the currency it has bought. In cross-currency ...
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