(FINANCE) for a financial instrument, the
person/institution who takes the opposite position. For example, in a credit
default swap (CDS), the buyer is someone who needs insurance against the possibility that a borrower will default on a loan. In that
case, the counterparty is whoever receives the CDS premiums, and pays out in the event of default.
The purpose of financial options is to minimize
risk to the buyer;
therefore, it creates potentially lucrative opportunities for the counterparty, because the counterparty takes on so much
risk.