2016-FRR Exam Dumps | Over a long period of time DeltaBank has amassed a large equity option position. Which of the following

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GARP.2016-FRR.v2024-09-09.q145
Question 130

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Question 130/145

Over a long period of time DeltaBank has amassed a large equity option position. Which of the following risks should be considered in this transaction?
I. Counterparty risk on long OTC option positions
II. Counterparty risk on short OTC option positions
III. Counterparty risk on long exchange-traded option positions
IV. Counterparty risk on short exchange-traded option positions

A. I

B. I, II

C. II, III

D. II, III, IV

Correct Answer: B

DeltaBank should consider counterparty risk on both long and short OTC option positions. OTC options do not go through a centralized exchange, making them subject to counterparty risk. Exchange-traded options have significantly lower counterparty risk because the exchange acts as the counterparty to all trades.

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