ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Counterparty risk is the probability that the other party in an investment, credit, or trading transaction may not fulfill its part of the deal and may default on the contractual obligations.

Detailed explanation-2: -Financial investment products such as stocks, options, bonds, and derivatives carry counterparty risk. Bonds are rated by agencies, such as Moody’s and Standard and Poor’s, from AAA to junk bond status to gauge the level of counterparty risk.

Detailed explanation-3: -Counterparty credit risk comes in two forms: pre-settlement risk and settlement risk.

Detailed explanation-4: -A counterparty is simply the other side of a trade-a buyer is the counterparty to a seller. A counterparty can include deals between individuals, businesses, governments, or any other organization. Counterparty risk is the risk that the other side of the trade will be unable to fulfill their end of the transaction.