Question

    OTC (Over The Counter) derivatives are considered risk, because -

    A These are not settled in clearing house Correct Answer Incorrect Answer
    B The do not follow formal rules Correct Answer Incorrect Answer
    C There is no prescribed margin to be maintained Correct Answer Incorrect Answer
    D These are not properly regulated Correct Answer Incorrect Answer
    E All the above Correct Answer Incorrect Answer

    Solution

    Over-the-counter (OTC) derivatives are contracts that are traded (and privately negotiated) directly between two parties, without going through an exchange or other intermediary. Products such as swaps, forward rate agreements, exotic options – and other exotic derivatives – are almost always traded in this way.

    Practice Next