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CIRE practice question: Derivatives | EnCiro

Daily Challenge/August 10, 2026

🔥 Daily ChallengeCIREDerivativesMedium

Which statement best describes a key feature of the legal framework established by the ISDA Master Agreement?

4 attempts · 25% correct

Each trade is treated as a separate and distinct legal contract to prevent cross-default.

Multiple payment obligations are offset into a single net payment to reduce credit risk.Correct

It provides a framework for exchange-listed derivatives to be traded on OTC markets.

Confirmations are only required for trades that are centrally cleared.

Why

Netting allows parties to offset multiple obligations into a single payment, which significantly reduces the credit risk between the two parties.

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