Question

Management at Bank ABC is attempting to determine which types of instruments to use for risk management. When comparing exchange-traded instruments to over-the-counter (OTC) instruments, which characteristic should the bank associate with exchange-traded instruments

Answer 1

Options and Swaps.

Step-by-step explanation:

Hedging is the process of offsetting risk associated with an asset by taking an opposite position in an underlying asset. The hedging may be profitable or it may be in no loss situation. The most common method of hedging is use of derivatives. It is used to minimize foreign exchange and interest rate movement risks. The few common derivatives are futures, swaps and options.