Which of the following statements is most accurate?
A) Over-the-counter derivatives are safer than exchange-traded derivatives.
B) Exchange-traded derivatives have less credit risk than OTC derivatives.
C) OTC derivatives are marketable.
D) OTC derivatives are government regulated, while exchange-traded derivatives are not.

Question

Quizplus · Accepted Answer

Exchange-traded derivatives are considered to have less credit risk than OTC derivatives because they are traded through a central clearing house that guarantees the trades, reducing the risk of counterparty default. OTC derivatives, on the other hand, are traded directly between parties without such intermediation, leading to higher credit risk.

Which of the Following Statements Is Most Accurate