vastapuolivakuus

Vastapuolivakuus, meaning "counterparty risk" in English, refers to the risk that the other party in a financial transaction will fail to fulfill their contractual obligations. This can arise in various contexts, including loans, derivatives, and insurance contracts. For example, if a company issues a bond, the investor faces counterparty risk that the company may default on its interest payments or principal repayment. In derivatives trading, such as options or futures, counterparty risk is the possibility that the seller of the contract will not be able to deliver the underlying asset or make the required payment at the agreed-upon time.

Mitigating counterparty risk is a crucial aspect of financial management. This can be achieved through several mechanisms. One common method is collateralization, where one party provides assets to secure the transaction, which can be seized if they default. Another is netting, which allows parties to offset mutual obligations, reducing the net amount at risk. Credit assessment and monitoring of counterparties are also vital. Financial institutions often maintain credit limits for their counterparties and engage in due diligence to understand their financial health. In more complex markets, central counterparties (CCPs) play a significant role by acting as intermediaries, guaranteeing trades and thereby reducing the risk for individual participants. The failure of a major financial institution can significantly amplify counterparty risk across the entire system.