One advantage of caps, collars, and floors is that because they are exchange-traded options there is no counterparty risk present in the transactions.

Name: One advantage of caps, collars, and floors is that because they are exchange-traded options there is no counterparty risk present in the transactions.
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Question

Quizplus · Accepted Answer

Caps, collars, and floors are typically over-the-counter (OTC) derivatives, not exchange-traded, and therefore they do carry counterparty risk.

One Advantage of Caps, Collars, and Floors Is That Because