Saturday, October 31, 2020

Tag: What Is Counterparty Risk and How Can You Minimize It?

What Is Counterparty Risk and How Can You Minimize It?

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by Peter Schiff, Schiff Gold:

One of the reasons to own physical gold is that it doesn’t come with any counterparty risk.

In simplest terms, counterparty risk is the chance that one party in a financial transaction will default on its contractual obligation. My asset is somebody else’s liability. If I loan you money, there is always the possibility that you won’t pay me back. Or consider buying a stock. There is a risk that the company will go bankrupt and the value of that stock will go to zero.