NCFM Derivatives Market (Dealers) Practice Questions - NCFM Derivatives Market (Dealers) Module Exam

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Which of the following statements is true regarding OTC derivatives markets compared to exchange-traded derivatives markets?

OTC markets have higher transparency and lower credit risk OTC markets offer highly customized contracts but lack a centralized clearing mechanism Exchange-traded contracts are less liquid and have higher transaction costs OTC contracts are regulated directly by the stock exchanges

Correct Answer:

OTC markets offer highly customized contracts but lack a centralized clearing mechanism

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