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counterparty risk

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acceptance credit

Overview page. Subjects: Financial Institutions and Services.

A means of financing the sale of goods, particularly in international trade. It involves a commercial bank or merchant bank extending credit to a foreign importer, whom it deems...

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aggregation

Overview page. Subjects: Financial Institutions and Services.

The netting of assets and liabilities between counterparties in the case of default or early termination of an agreement.

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arm's length

Overview page. Subjects: Economics — Accounting.

1. Denoting a transaction entered into by unrelated parties, each acting in their own best interests in paying or charging prices based on fair market values. In the...

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assignment

Overview page. Subjects: Economics.

The act of transferring, or a document (a deed of assignment) transferring, property to some other person. Examples of assignment include the transfer of rights under a contract or benefits...

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Capital Adequacy Directive

Overview page. Subjects: Economics.

(CAD).

European Union (EU) directive issued on 15 March 1995 set out in the Second Banking Directive to harmonize the regulatory structure of deposit-taking institutions within the...

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cash against documents

Overview page. Subjects: Financial Institutions and Services.

(CAD)

1 The simultaneous exchange of assets and payment.

2 Payment terms for exported goods in which the shipping documents are sent to a bank,...

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consideration

Overview page. Subjects: Law.

An act, forbearance, or promise by one party to a contract that constitutes the price for which he buys the promise of the other. Consideration is essential to the validity of any contract...

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credit risk

Overview page. Subjects: Economics.

The risk that a counterparty will default or delay payment on an obligation or that the value of a flow of payments will decline due to an adverse movement in the counterparty's credit...

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dealer option

Overview page. Subjects: Economics.

An option that is offered over-the-counter (cf. exchange-traded). The counter-party, usually the writer, will be the financial institution making the transaction rather than the exchange's...

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delivery risk

Overview page. Subjects: Economics.

A term used in the foreign exchange markets for the risk that the counterparty to a transaction, although willing, may be prevented from honouring his obligations due to, for instance ...

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ECO net

Overview page. Subjects: Economics.

(Forex).

A settlement system for foreign exchange allowing participating banks to use multilateral netting methods to reduce their counter-party risk. The banks pay the net...

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fiduciary call and put

Overview page. Subjects: Economics.

A method of collateralizing call and put options by investing the exercise price in suitable investments held by a fiduciary. This both reduces the counterparty risk with the option...

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flex future

Overview page. Subjects: Economics.

Type of futures contract where the specifications of the transaction can be altered by buyers and sellers. It provides more flexibility than the standardized contract and therefore has some...

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foreign exchange forward

Overview page. Subjects: Economics.

A forward transaction in foreign exchange. Often just called forwards. A bilateral contract to exchange a specified amount of one currency for another at a specific future date (cf....

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Gensaki

Overview page. Subjects: Economics.

The market for the resale and repurchase of medium- and long-term government securities to provide a money market substitute in Japan.

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go my way/go your way

Overview page. Subjects: Economics.

(USA).

Method of resolving disputes in failed transactions where the counterparties mutually agree to change the details of the trade so as to ensure good delivery (cf. out-trade).

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guarantee

Overview page. Subjects: Economics — Law.

1 An undertaking by a second party to agree to make good principal, interest if the borrower, counterparty, or issuer defaults (cf. asset-backed; collateralized).

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insolvency risk

Overview page. Subjects: Financial Institutions and Services.

1 The risk that a borrower may be unable to repay a debt.

2 The risk that a counterparty may be unable to honour a contract owing to insolvency. See...

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intermediary

Overview page. Subjects: Economics — Business and Management.

Firms in a distribution channel that help a company to find customers or make sales to them. Intermediaries include brokers, agents, dealers, wholesalers, and retailers that buy and resell...

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liability

Overview page. Subjects: Economics.

The items on the debit side of a balance-sheet. These include unpaid bills from suppliers, unpaid taxes, and secured and unsecured debts of various sorts. The net equity value of the firm...

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