What Is the Primary Risk If a Major OTC Counterparty Defaults? ⎊ Path

What Is the Primary Risk If a Major OTC Counterparty Defaults?

The primary risk is a significant financial loss for the non-defaulting party, which can lead to a domino effect across the financial system if the counterparty is a major institution. The default can trigger a scramble to replace the defaulted contracts, potentially causing market disruption and liquidity stress.

How Does a Central Counterparty (CCP) Reduce Systemic Risk in the Financial System?

How Did the Failure to Collect Adequate Initial Margin Contribute to past Financial Crises?

What Is a Liquidation Cascade and How Does It Differ from a Standard Margin Call?

How Does the Concept of ‘Disruption’ Affect the Long-Term Growth Rate Assumption?

What Is “Systemic Operational Risk” in the Financial System?

Define ‘Systemic Risk’ in the Context of the Crypto Financial System

How Does a Liquidation Cascade Amplify Market Volatility?

What Is the Concept of ‘Market Disruption’ in a Derivative Contract’s Terms?

Glossar

OTC Counterparty

Exposure ⎊ An OTC counterparty in cryptocurrency derivatives represents a principal taking on credit and market risk when engaging in bilateral agreements outside of regulated exchanges.