Explanation:
Over-the-counter (OTC) derivatives are customized contracts negotiated directly between two parties. Due to this customization and lack of a centralized exchange, they generally have lower liquidity compared to standardized exchange-traded derivatives. Therefore, the statement "OTC derivatives have very good liquidity" is false.
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Q.58 Which of the following statements about over-the-counter (OTC) derivatives is false?
A
OTC derivatives have flexible and negotiable terms
B
OTC derivatives have very good liquidity
C
The credit risk for OTC derivatives is bilateral
D
OTC derivatives have negotiable and non-standard maturities
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