Hi there, Was wondering if someone could explain to me (or direct me to a resource) what counterparty risk trading is? Were these trading desks around before the 2008 crisis? I've heard guys throwing around terms like CVA, FVA, RWA etc. and want to learn more about these concepts.
Counter Party Risk is a risk term not a trading method. The long and short positions are backed by the financial credit of the parties involved unlike an exchange middle man which guarantees the delivery of a long or short position. Those products that do not involve an exchange are considered OTC (over the counter) products.