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Explanation:
The true statement is D. OTC derivatives are often customized, which makes them less fungible than exchange-traded derivatives. As a result, they can be harder to unwind or transfer to another counterparty.
Why the others are false:
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Q-601.3. In a comparison between exchange-traded derivatives and over-the-counter (OTC) derivatives, which of the following statements is TRUE?
A
Customized OTC derivatives are exotic, and exotic products are not socially useful
B
Compared to an exchange-traded derivative, a customized OTC derivative offers better liquidity but greater basis risk
C
Due to the leverage inherent in customized OTC derivatives, the total market value of OTC derivatives is nearly 100% of their gross notional outstanding
D
Compared to an exchange-traded derivative, a disadvantage of OTC derivatives is their relative lack of fungibility; i.e., difficulty in unwinding position or assigning to another counterparty