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Question

When contrasting exchange-traded derivatives and over-the-counter derivatives, credit risks

A Exchange-traded derivatives Correct Answer Incorrect Answer
B OTC derivatives Correct Answer Incorrect Answer
C Both A and B Correct Answer Incorrect Answer
D Either A or B Correct Answer Incorrect Answer
E None of the above Correct Answer Incorrect Answer

Solution

Credit risk includes the risk of default. Risk of non-payment by a counterparty. This risk is a concern in the case of OTC derivatives. It is of less concern in the case of exchange-traded derivatives as the payments are guaranteed by the clearing houses.

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