Definition of Counterparty

What is a "counterparty"? What is the definition of a "counterparty"?

A "counterparty" is the entity (or "party") that is on the opposite side of any financial transaction.

For instance - if you buy a house, then the "counterparty" is the person who is selling you that house.

For instance - if you buy 1,000 shares of MSFT, then the "counterparty" in that transaction is the person (or company) that is selling you the 1,000 shares of Microsoft.

-- Counterparty definition --For instance - if you buy 50 December Microsoft call options with a strike price of $25, then the "counterparty" in the transaction is the person who is selling (or writing) the options.

For instance - if you purchase a car, then the person who is selling you the car is the "counterparty" in the transaction.

As you can see, the term "counterparty" applies to every transaction that involves the purchasing of an asset.

In order to purchase an asset, you need somebody to sell you that asset. This person (or company) is the "counterparty".

-- Articles That Mention Counterparty:

Citadel Investment Group LLC Continues To Struggle in November

Citadel's Kensington Global Strategies Fund, Wellington LLC Fund Have Their Counterparty Credit Ratings Cut by S&P

Merrill Lynch Agrees to Buyout From Bank of America; The Financial Landscape Continues to Abruptly Change

Is Thornburg Mortgage In Danger of Falling into Bankruptcy?