Options & derivatives
Over-the-counter (OTC)
The over-the-counter (OTC) market refers to trades made directly between two parties, outside a centralized exchange.
The over-the-counter (OTC) market refers to trades made directly between two parties, outside a centralized exchange.
On an OTC market, terms are negotiated privately rather than standardized. This offers flexibility but less transparency and higher counterparty risk. Many derivatives trade this way.
Two institutions strike a custom derivative contract directly between themselves, OTC.
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