• Counterparty Unlike insurance transactions, in which insurers use their considerable leverage to assume risk, capital market transactions require a counterparty. For each seller of a liquid security there must be a buyer, counterparty. When risk is transferred to the capital markets, it must be assumed by a counterparty willing to take on the risk. Because of the need for high-risk, uncorrelated positions in diversified investment portfolios, there are risk-taking counterparties.