Answer: option.

## Explanation In derivatives markets, the default risk differs among various instruments: **Option Contracts**: Only the seller (writer) of an option can default. The buyer pays the premium upfront and has the right, but not the obligation, to exercise the option. The seller, however, has the obligation to perform if the buyer chooses to exercise. Therefore, the buyer faces counterparty risk from the seller, but the seller does not face counterparty risk from the buyer. **Swap Contracts**: Both parties can default on a swap. Swaps involve periodic exchanges of payments between two parties, so either party could fail to make their scheduled payments. **Forward Contracts**: Both parties can default on a forward contract. At settlement, either party could fail to fulfill their obligation to buy or sell the underlying asset at the agreed-upon price. **Key Distinction**: - Options: Unilateral obligation (seller only) - Swaps and Forwards: Bilateral obligations (both parties) Therefore, among the three choices, only options have the characteristic that **only the seller can default**.

Author: LeetQuiz .