Financial Risk Manager Part 1

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Which of the following is a key advantage of exchange-based derivatives for hedging?

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A

Exchange-based derivatives can be traded without incurring transaction costs.

B

Exchange-based derivatives offer flexibility in terms of customizing the hedging instrument to match the position that the firm wants to hedge.

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C

Exchange-based derivatives are typically more effective in reducing basis risk in a hedging transaction compared to bilateral OTC derivatives.

D

Exchange-based derivatives can minimize counterparty credit risk through the use of netting and margin requirements.

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