What is Counterparty Credit Risk?
Counterparty Credit Risk The risk that the counterparty to a financial contract will default before the final settlement of the transaction’s cash flows.
Source: CFA Institute, IFRS Foundation, FASB (GAAP), Basel III Framework
How is “Counterparty Credit Risk” Used in Practice?
Counterparty credit risk is a critical factor in derivatives and securities financing transactions, requiring robust risk management and capital allocation.
Certification Exam Relevance
Who Needs to Know This Term?
- Financial Analysts
- Bankers
- Traders
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What is Counterparty Credit Risk?
The risk that the counterparty to a financial contract will default before the final settlement of the transaction’s cash flows.
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