• The counterparty is just the other side of the transaction - the buyer is the counterparty of the seller.
  • A counterparty may include transactions between individuals, businesses, governments, or any other entity.
  • Counterparty risk is the risk that the other party to a transaction will not be able to fulfill their end of the transaction.
  • In many financial transactions, the counterparty is unknown and the counterparty risk is mitigated by the use of clearing firms.