Академический Документы
Профессиональный Документы
Культура Документы
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Exchange Traded
OTC Traded
Pricing
Standardized
Customized
Maturity
Standardized
Customized
Quantity
Standardized
Customized
Frequency
Standardized
Customized
Quality
Standardized
Customized
Documentation
Standardized
Customized
Regulatory Body
One entity
Various
The primary difference is standardization versus customization. This leads to a crucial distinction.
When dealing in exchange traded products terms are standardized and the clearinghouse
guarantees that the other side of any transaction performs to its obligations. That is, it assumes
all contingent default risk so both sides do not need to know about each others credit quality.
This differs from customized OTC products where there is no clearinghouse to guarantee
performance.
The need to know the counterpartys credit standing is an essential distinction. The exposure
difference is quite significant. In summary:
Exchange Traded = Standardizes = Market Risk
OTC Traded = Customized = Market Risk + Counterparty Risk