Assume discrete time compounding in all the questions

Which of the following statements about derivatives is least accurate?

A$.$ They derive their value from an underlying.

B$.$ They have low degrees of leverage.

C$.$ They involve two parties $-$ a buyer and a seller.

Which of the following statements about derivatives is not true?

A$.$ They are used for risk management.

B$.$ Are created in the form of legal contracts.

C$.$ They are created in the spot market.

Which of the following best describes a characteristic of exchange$-$traded derivatives?

A$.$ They are customized financial instruments.

B$.$ A clearing house effectively guarantees against default risk.

C$.$ They are characterized by a low degree of regulation.

Which of the following statements about the over$-$the$-$counter derivatives is least accurate?

A$.$ They are less liquid than exchange$-$traded derivatives.

B$.$ They are less regulated than exchange$-$traded derivatives.

C$.$ They offer more flexibility than exchange$-$traded derivatives.

$2$

Which of the following least likely describes over$-$the$-$counter $($OTC$)$ derivatives relative to exchange$-$traded derivatives? OTC derivatives are:

A$.$ More customized.

B$.$ Less liquid.

C$.$ Less transparent.