What Is the Risk of 'Counterparty Exposure' When Using OTC Crypto Derivatives? ▴ Learn

What Is the Risk of ‘Counterparty Exposure’ When Using OTC Crypto Derivatives?

Counterparty exposure is the risk that the other party in an over-the-counter (OTC) derivatives trade will default on their obligation before the settlement of the contract. Unlike on-exchange trades, OTC derivatives lack a central clearing house to guarantee the trade.

For a DAO treasury, this means the risk of losing the full value of the derivative contract if the counterparty fails to pay out.

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