Which of the following derivative contract features does not reduce counterparty risk?
A)flexible forward contracts
B)standardized exchange-listed contracts
C)requirements to post margin
D)requirement to trade via a clearingho

Question

Quizplus · Accepted Answer

Flexible forward contracts do not reduce counterparty risk as they are not standardized, exchange-listed, and do not require margin or trading through a clearinghouse. Counterparty risk refers to the risk that one party will default on its obligations to the other party in a transaction, and standardized exchange-listed contracts, margin requirements, and clearinghouse requirements all help mitigate this risk. Flexible forward contracts, on the other hand, are negotiated privately between parties and may lack these risk-reducing features.

Which of the Following Derivative Contract Features Does Not Reduce