Counterparty risk, also known as default risk, arises when one party in a financial transaction fails to fulfill its contractual obligations, potentially leading to financial losses for the other party.
Effective counterparty risk management is essential for maintaining financial stability and minimizing potential disruptions in markets. Key Components of Counterparty Risk Management: Counterparty AssessmentInstitutions assess the creditworthiness of their counterparties by analyzing financial statements, credit ratings, and historical performance. This helps in understanding the likelihood […]
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