What Are the Primary Types of Counterparty Risk Present in OTC Derivatives? ▴ Learn

What Are the Primary Types of Counterparty Risk Present in OTC Derivatives?

The main risk is credit risk, which is the possibility that the counterparty to the contract will default on their obligations before the contract settles. Since there is no CCP guarantee, each party must assess the creditworthiness of the other.

Liquidity risk can also arise if a party cannot easily offset or exit the customized position, compounding the default risk.

What Are the Key Risks a CCP Assumes by Guaranteeing Trades?

What Is the Primary Difference between a Central Counterparty (CCP) and an Over-the-Counter (OTC) Market?

In Derivatives, How Does the Use of a Central Clearing Counterparty (CCP) Mitigate Counterparty Risk Similar to How the Blockchain Prevents Double-Spending?

How Does the Introduction of a Central Counterparty (CCP) Change the Counterparty Risk Profile?