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Posted AT 2:50 PM EST on 16/09/08

Behind counterparty risk and credit default swaps

Globe and Mail Update

Given the crisis on Wall Street and the focus on American International Group Inc., one of the world's largest insurers, everybody is suddenly talking about counterpary risk. What is counterparty risk, and why is it suddenly an issue? In the simplest terms, counterparty risk is the chance that the person on the other side of a deal - the counterparty - won't be there when it's time to pay up. Take an example most people can relate to: Selling a home.

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