A counterparty is the other party that participates in a financial transaction, and every transaction must have a counterparty in order for the transaction to go through. More specifically, every buyer of an asset must be paired up with a seller who is willing to sell and vice versa. For example, the counterparty to an option buyer would be an option writer. For any complete trade, several counterparties may be involved (for instance a buy of 1,000 shares is filled by ten sellers of 100 shares each).

Which is the best definition of a counterparty?

1. Explaining Counterparties. The term counterparty can refer to any entity on the other side of a financial transaction.
2. Types of Counterparties. Counterparties on a trade can be classified in several ways.
3. Counterparties in Financial Transactions.
4. Counterparty Risk

When do you have a counterparty in a transaction?

Counterparties in Financial Transactions. In a general sense, any time one party supplies funds, or items of value, in exchange for something from a second party, counterparties exist. Counterparties reflect the dual-sided nature of transactions.

When do you have a counterparty in a transaction?

Counterparties in Financial Transactions. In a general sense, any time one party supplies funds, or items of value, in exchange for something from a second party, counterparties exist. Counterparties reflect the dual-sided nature of transactions.

Can a business be a counterparty to an individual?

This means an individual can be a counterparty to a business and vice versa. In any instances where a general contract is met or an exchange agreement takes place, one party would be considered the counterparty, or the parties are counterparties to each other. Who are the counterparties to the sale of a good? That is, the buyer and the seller of a good are the counterparties to the sale of that good. While it could apply to any transaction, the term is most common when referring to the counterparties of a swap.

Source: Farlex Financial Dictionary.