Understanding Exchange-Traded Derivatives

Hard Derivative Markets And Instruments Exchange-traded Derivatives

In the context of exchange-traded derivatives, consider a scenario where a trader wants to hedge against fluctuations in the price of crude oil. The trader decides to enter into a futures contract on an exchange.

Which of the following statements about exchange-traded derivatives is MOST accurate?

Exchange-traded derivatives require the posting of initial margin and are subject to daily mark-to-market settlement.

Exchange-traded derivatives are not regulated and do not require a central clearing entity.

Exchange-traded derivatives provide a platform for customized contracts tailored to specific hedging needs.

Hint

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