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

Significant financial loss and potential market disruption (domino effect).
Greeks.Live23.11.25

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.

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