Definition of Counterparty:
The other party or participant in an agreement, court case, deal, or negotiation. See also associated counterparties.
An opposite party in a contract or financial transaction.
The term counterparty can refer to any entity on the other side of a financial transaction. This can include deals between individuals, businesses, governments, or any other organization. Additionally, both parties do not have to be on equal standing in regards to the type of entities involved. This means an individual can be a counterparty to a business and vice versa. In any instances where a general contract is met or an exchange agreement takes place, one party would be considered the counterparty, or the parties are counterparties to each other. This also applies to forward contracts and other contract types.
A counterparty is the other party that participates in a financial transaction, and every transaction must have a counterparty in order for the transaction to go through. More specifically, every buyer of an asset must be paired up with a seller who is willing to sell and vice versa. For example, the counterparty to an option buyer would be an option writer. For any complete trade, several counterparties may be involved (for instance a buy of 1,000 shares is filled by ten sellers of 100 shares each).
How to use Counterparty in a sentence?
- When entering a negotiation, its important to know what you want out of it. The key to getting what you want is considering what the counterparty wants as well however.
- The purpose is to have mutuality between each member and the clearing house for set-off purposes: otherwise two separate banks contracting with a defaulting counterparty could not set off their individual losses and gains.
- You need to make sure that a counterparty comes away happy so that you can do more business with them in the future.
- He was the counterparty in the agreement and would have final say in what happened with the final negotiations that day.
- A counterparty can include deals between individuals, businesses, governments, or any other organization.
- A counterparty is simply the other side of a trade - a buyer is the counterparty to a seller.
- Counterparty risk is the risk that the other side of the trade will be unable to fulfill their end of the transaction. However, in many financial transactions, the counterparty is unknown and the counterparty risk is mitigated through the use of clearing firms.
Meaning of Counterparty & Counterparty Definition