Derivatives - Derivatives Section 1
- Option : B
- Explanation : Over-the-counter derivatives are customized and less transparent relative to exchange traded derivatives. There is a tendency to think that OTC market is less liquid relative to the exchange market, but this is not necessarily true
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- Option : B
- Explanation : Market makers buy at one price (the bid), sell at a higher price (the ask), and hedge whatever risk they otherwise assume. They do not charge a commission.
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8. As compared to exchange-traded derivatives, over-the-counter derivatives are more likely to have:
- Option : B
- Explanation : Customization of contract terms is a characteristic of over-the-counter derivatives
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9. As compared to over-the-counter options, futures contract:
- Option : C
- Explanation : Futures contract are not exposed to default risk
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10. Which of the following statements is least accurate?
- Option : C
- Explanation : A credit default swap is a contingent claim.
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