Counterparty risk
Counterparty risk is the possibility that the other party to a financial contract fails to meet its obligations, such as making a payment or completing settlement. Exposure depends on the contract, collateral and clearing arrangements; safeguards can reduce risk without necessarily eliminating it.
In a hypothetical bilateral contract, a payment is due from the other party. If that party defaults, the recipient may face delays or recover only part of the amount.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Glossary definitions are general education only and are not investment advice. Risk disclosure