What Is Counterparty Risk?

Counterparty Risk across 2 exams

Counterparty Risk appears on the following exams. Each defines it in the context candidates are tested on:

Series 57

The risk that the other party in a transaction will fail to perform their obligations or that a financial institution will fail to settle transactions properly. This is a critical concern for traders managing positions.

Series 31

The risk that a trading counterparty (FCM, clearing firm, or other intermediary) becomes insolvent or fails to meet its obligations. Managed futures investors face counterparty risk when their funds are held by or traded through intermediaries, requiring careful monitoring of intermediary creditworthiness.