n NISM Certifications
NSM General NISM
Medium

What is the key distinguishing factor between interest rate options traded over-the-counter (OTC) and those traded on an exchange?

Practice question from NISM Series IV - Mock Test 3 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Customised contract versus Standardised contract

  2. B

    Bilateral trading versus Centralized trading

  3. Both of the above

    Correct answer

  4. D

    None of the above CORRECT ANSWER: Both of the above

Why this is the answer

OTC contracts are customized and traded bilaterally, while exchange-traded contracts are standardized and traded on a centralized platform with clearing support.

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