What is meant by systemic risk

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Question: 1. What is a derivative security, and what do we mean when we say it is a zero-sum game? How does this relate to concepts such as the underlying, synthetic securities, market completeness, and an arbitrage induced law of one price?

2. How do concepts such as notional value, long-short, counter-party, and counter-party risk relate to the derivatives market?

3. What is meant by systemic risk as it relates to derivatives markets? How does systemic risk relate to counter-party risk in this context?

4. What are exchange markets and OTC markets? What is the structure and function of each of these types of markets? How do these markets compare/contrast with respect to issues such as counter-party risk, form of contract (e.g., futures vs. forwards), and regulation?

Reference no: EM131967185

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