Derivative Purpose, Risks and OTC versus Exchange Trading

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Derivative Purpose, Risks and OTC versus Exchange Trading - Article

Derivatives allow banks and treasury users to **hedge, transfer, transform, or take market risk** without necessarily buying or selling the underlying exposure. This article explains derivative purpose, underlying assets, leverage, major risks, and the important distinction between **OTC and exchange-traded derivatives**. It also covers customisation, clearing, margining, counterparty risk, liquidity, suitability, and common CAIIB exam traps.

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