Exchange-traded vs over-the-counter markets — Flashcards

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Exchange-traded vs over-the-counter markets — Flashcards

8 flashcards

Read Study Notes Questions

What is the primary advantage of over-the-counter (OTC) derivatives compared to exchange-traded derivatives?

In exchange-traded derivative markets, how do exchange members (dealers or market makers) primarily earn their profits?

How does a "futures contract" differ fundamentally from a forward contract?

In over-the-counter (OTC) derivative markets, what is the primary risk that participants face which is largely absent in exchange-traded markets?

In futures markets, what happens if an account balance falls below the "maintenance margin"?

In derivative markets, what defines a "swap"?

In futures markets, what is the "settlement price"?

In the context of financial markets, what is a derivative?

Exchange-traded vs over-the-counter markets CFA Flashcards - Medical Study Cards

Master Exchange-traded vs over-the-counter markets with Oncourse flashcards. These spaced repetition flashcards are designed for medical students preparing for NEET PG, USMLE Step 1, USMLE Step 2, MBBS exams, and other medical licensing examinations.

Exchange-traded vs over-the-counter markets Flashcard Deck - 8 Cards

Flashcard 1: What is the primary advantage of over-the-counter (OTC) derivatives compared to exchange-traded derivatives?

Answer: OTC derivatives are highly customizable to perfectly fit the specific risk management needs of the counterparties.

Flashcard 2: In exchange-traded derivative markets, how do exchange members (dealers or market makers) primarily earn their profits?

Answer: Through the bid/ask spread between buy and sell prices, rather than speculating on the underlying's direction.

Flashcard 3: How does a "futures contract" differ fundamentally from a forward contract?

Answer: A futures contract is a highly standardized, exchange-traded agreement that requires daily mark-to-market settlement of gains and losses.

Flashcard 4: In over-the-counter (OTC) derivative markets, what is the primary risk that participants face which is largely absent in exchange-traded markets?

Answer: Counterparty risk (the risk that the other party will default on their contractual obligations).

Flashcard 5: In futures markets, what happens if an account balance falls below the "maintenance margin"?

Answer: The account holder must deposit additional funds to bring the margin balance all the way back up to the initial margin amount (unlike equity margin calls).

Flashcard 6: In derivative markets, what defines a "swap"?

Answer: An over-the-counter agreement between two parties to exchange a series of cash flows on multiple settlement dates over a specified time period.

Flashcard 7: In futures markets, what is the "settlement price"?

Answer: An average of the prices of trades over a specific period at the end of the trading session, used to calculate daily mark-to-market gains and losses.

Flashcard 8: In the context of financial markets, what is a derivative?

Answer: A security that derives its value from the value of another security or a variable (such as an interest rate or stock index) at some specific future date.

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Exchange-traded vs over-the-counter markets Flashcards for CFA

Study 8 flashcards on Exchange-traded vs over-the-counter markets for CFA Derivatives and Risk Management (Level I). These active recall cards cover the key concepts, clinical associations, and high-yield facts from this chapter of Derivative Instrument and Derivative Market Features. Each card is designed to test your understanding rather than just recognition, building stronger and more durable memories for exam day.

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There are 8 flashcards for Exchange-traded vs over-the-counter markets, covering the key concepts, clinical correlations, and high-yield facts from this chapter of Derivative Instrument and Derivative Market Features.

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Yes. This page covers one chapter of Derivative Instrument and Derivative Market Features. Visit the topic page to see all chapters and their flashcards under Derivatives and Risk Management (Level I).

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