Exchange-Traded Derivatives & OTC Derivatives

Based on the trading mechanism, the derivatives can be classified into two

Now we can check out the differences between Exchange-traded Derivatives and OTC Derivatives.

Exchange-traded derivatives.

Exchange-traded derivatives do not have any counterparty risk.
In this type of did, we do this the transaction goes are less.
Prices of exchange-traded derivatives are publicly available.
These are contracts that trade on an organized exchange.
In this the market traders do not know exchange-traded derivatives, the contracts have standardized terms set by the exchange or the clearinghouse.

OTC derivatives

In OTC derivatives counterparty risk is present.
in this transaction costs are more.
prices of OTC derivatives are not publicly available it’s kept confidential.
Over the counter, derivatives result from agreements between two parties.
in this, the market players are known to each other.
In OTC derivatives contracts are customized to the requirements of the counterparty.

We can choose any type of derivatives according to our interests.