Statement I is consistent with the differences between OTC markets and exchange markets. In OTC markets, participants have the flexibility to negotiate the terms of the contract. This is because OTC contracts are not standardized and can be tailored to meet the specific needs of the parties involved. This includes aspects such as the maturity of the contract, the grade of the underlying assets, and the terms of delivery. This level of customization is not available in exchange markets, where contracts are standardized. Standardization in exchange markets ensures that the contracts are more liquid and easier to trade, but it also means that participants do not have the same level of flexibility to negotiate contract terms as they do in OTC markets.

Choice B is incorrect. While it's true that exchange markets clear trades through a central counterparty, this doesn't necessarily increase risk for participants. In fact, the presence of a central counterparty can reduce risk by providing guarantees on trade execution and settlement. The default risk of the central counterparty is typically mitigated through various safeguards such as margin requirements, daily mark-to-market and loss mutualization among members.

Choice C is incorrect. As explained above, Statement II does not accurately reflect the differences between OTC markets and exchange markets because it incorrectly associates higher risk with exchange market due to single counterparty clearing.

Choice D is incorrect. Statement I accurately reflects a key difference between OTC markets and exchange markets - flexibility in negotiating contract terms in OTC market which isn't usually possible in standardized contracts of an exchange market.