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Finance: What is Counterparty Risk? 9 Views
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Description:
What is Counterparty Risk? Counterparty risk is the risk to either party within a transaction that the other will not or be unable to abide by the terms of the transaction agreement. This can be in the form of payment default or in providing asset or funding in accordance to the agreement schedule, or a host of other factors.
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Transcript
- 00:00
Finance a la shmoop what is counterparty risk?
- 00:06
alright here's you the party and here's the guy you're contracting with to sell [Woman and man stood side by side]
- 00:12
18 tons of bricks or buy a line of credit for your flower shop or sell a
- 00:17
futures contract with the right to buy oil at 80 bucks a barrel for the next [Person signs contract]
- 00:21
two years so you're the party and he's the counterparty and the yin and yang of
Full Transcript
- 00:27
the party and here's the risk yeah well the counterparty risk is just
- 00:31
that the person you contracted with doesn't live up to their end of the
- 00:35
bargain you pay them good money you sign a good contract all lawyered up and [Stack of money and contract appears]
- 00:40
stuff and then they split like totally split disappeared sea men choose the
- 00:44
bottom of the ocean maybe they went to Bora Bora
- 00:47
maybe they got facial surgery in the Philippines you know they do that now [George Clooney in a surgical bed]
- 00:50
well when that happens you will probably feel like crying and you should its your
- 00:54
counterparty you can cry if you want to come on that was a good reference people [Man singing]
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