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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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