Definition, Meaning & Synonyms

counterparty

noun

/ˈkaʊntərˌpɑrti/

Definition

A counterparty is an entity that participates in a financial transaction with another party.

Examples

In a derivatives transaction, the counterparty is responsible for fulfilling the terms of the contract.
Investors must carefully evaluate the counterparty risk involved in their trading agreements.
Insurance companies often act as counterparties in various financial instruments.

Meaning

In finance, a counterparty is either of the two parties involved in a trade or agreement. Each party assumes the risk of the other and can be an individual or an institution.