One party to a forward transaction does not bear the risk that the other party will default.

Question

Quizplus · Accepted Answer

In a forward transaction, both parties bear the credit risk of the counterparty defaulting. This is because forward transactions are OTC (over-the-counter) agreements and not traded through a clearinghouse. Therefore, the creditworthiness of the parties involved is critical in ensuring the successful completion of the transaction.

One Party to a Forward Transaction Does Not Bear the Risk