What Is 'Counterparty Risk' in This Context? ▴ Learn

What Is ‘Counterparty Risk’ in This Context?

Counterparty risk is the risk that the other party in a financial transaction will default on their obligation. In futures trading, the exchange acts as the central counterparty.

The insurance fund and liquidation systems are designed to minimize the risk that a defaulting trader's loss becomes a liability for the exchange or other profitable traders.

What Is the Difference between “Auto-Deleveraging” and Using an Insurance Fund?

How Do Protocols That Offer Single-Sided Liquidity Provisioning Manage the Risk of Impermanent Loss for Their Users?

How Does the Lack of a Traditional CCP in Many DeFi Derivatives Protocols Increase Protocol Risk?

How Does a Derivatives Exchange Use an Insurance Fund to Manage Liquidation Risk?