In the interbank market, every counterparty was potentially vulnerable.

ECONOMIST: Risk and the new financial order

In the meantime, it remains difficult for investors to survey a fund's exposure to both the market risk and the counterparty risk in a swap.

WSJ: Swaps Add Risk to Fund Portfolios

For example, during a period of heightened stress, participants may be willing to provide liquidity to a market if a strong central counterparty is present but not otherwise.

FORBES: Transcript

During the financial crisis, the credit default swap (CDS) market, a part of the OTC derivatives market, took center stage as difficulties in financial markets began to intensify and the counterparty risk involved in a largely bilaterally cleared market became apparent.

FORBES: Another Financial Crisis Is On The Way, Mobius Says

The financial infrastructure also has important effects on how market participants respond to perceived changes in counterparty risk.

FORBES: Reducing Systemic Risk

When a cash-rich party enters the market as a lender, it expects its counterparty, the borrower, to put up collateral bonds as protection against default.

ECONOMIST: Repurchase agreements

One of our concerns was that the infrastructures of those markets and the risk- and liquidity-management practices of market participants would not be adequate to deal in an orderly way with the collapse of a major counterparty.

FORBES: Transcript