Swaps and forwards are subject to contingent risk; exchange-traded futures and options are not.

Question

Quizplus · Accepted Answer

Swaps and forwards are customized contracts that are not traded on an exchange, so they are subject to contingent risk, which is the risk that one party will not fulfill their obligations under the contract. Exchange-traded futures and options, on the other hand, are standardized contracts that are traded on an exchange, so they are not subject to contingent risk.

Swaps and Forwards Are Subject to Contingent Risk; Exchange-Traded Futures