Question
An OTC derivative market consists of 6 dealers, who trade with each other. Consider the following statements on bilateral clearing and central clearing. I. If
An OTC derivative market consists of 6 dealers, who trade with each other.
Consider the following statements on bilateral clearing and central clearing.
I. If the market used bilateral clearing, the total number of master agreements would equal 16.
II. If the market used central clearing, the central clearing counterparty would require members to post initial margin.
Which of the following is correct?
a.
Statement I is correct, Statement II is incorrect.
b.
Statement I is incorrect, Statement II is incorrect.
c.
Statement I is incorrect, Statement II is correct.
d.
Statement I is correct, Statement II is correct.
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