What Is the Term for the Risk of Non-Payment at the Expiration of a Forward Contract? ▴ Learn

What Is the Term for the Risk of Non-Payment at the Expiration of a Forward Contract?

The term for the risk of non-payment at the expiration of a forward contract is counterparty risk or credit risk. Since the contract is a private agreement, there is a risk that the party with the loss will default on their obligation to pay or deliver the asset.

This is the main disadvantage of forwards compared to futures, where the clearing house guarantees performance.

What Is the Primary Difference between a Forward Contract and a Futures Contract?

How Does the Concept of ‘Basis Risk’ Apply to the Miner’s Forward Contract?

Why Is Theta Decay Non-Linear, Especially near Expiration?

Define a Forward Contract and How It Differs from a Futures Contract