bond777,
For FRM purposes (and from a conventional perspective), they are the same.
(I hedge only b/c counterparty risk is such a hot topic, I’m hesitant to make a universal claim for fear i miss some modern distinction ... I am pretty confident about this but it reminds me of liquidity risk: traditionally it was safely a class/type of market risk but lately on closer inspection it’s been parsed up such that to assert market risk > liquidity risk would find some disagreements).
But from the perspective of FRM study, clearly, counterparty risk is a type (sub-class) of credit risk. For example, as Jorion classifies model risk as a type (sub-class) of operational risk, counterparty risk is type of credit risk.
...and FWIW, it connotes, but does not necessarily denote, a contractual derivative transaction with a counterparty. Compare to a funded loan where you invest in a credit: you have default risk (credit risk > default risk; i.e., default risk is a subclass/type of credit risk) but if you instead, say, enter into a credit default swap then, instead of default risk, we generally say each counterparty has “counterparty risk” with the other (although the protection buyer has most of the counterparty risk/exposure to the protection seller). Hope that helps…David
