One key difference between swaps and option contracts is:
A) swaps are derivative agreements and options are not.
B) swaps do not involve any risk and options do.
C) options transfer risk, swaps create risk.
D) options trade on organized exchanges and swaps do not.

Question

Quizplus · Accepted Answer

Options trade on organized exchanges, such as the Chicago Board Options Exchange (CBOE), while swaps are typically traded over-the-counter (OTC) between two parties. This is a key difference between the two financial instruments. Option contracts are also derivative agreements, just like swaps, and can transfer risk. However, swaps do not necessarily create risk, but instead allow parties to manage and transfer existing risk.

One Key Difference Between Swaps and Option Contracts Is