Question

Question 1: Pick up the one(s) that can have OTC contracts. (Choose ALL the correct answer(s) that apply)

1 Interest Forward

2 Currency Futures

3 Interest Swap

4 Currency Forward

Question 2:

Which one of the following is the MOST risky derivative? Forward, or Futures, or Swap?

		Hard to say
		They are equally risky
		Forward
		Future
		Swap

Answer 1

a) Out of the following, the following can have OTC contracts :-

1. Interest Forward

3. Interest Swap

4 . Currency Forward

Currency futures cant be OTC because they are exchange traded.

b) Out of the following swap is most risky( assuming the number of payments is more than 1)

This is because out of the following :-

Forward and Swap are OTC contracts, so the risk of default is more

Also, swaps have more than 1 payments whereas forwards are contracts for only one transaction.

I hope this makes sense and helps you.

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