The two main categories of derivatives?

• A. Futures and options
• B. Futures and swaps
• C. OTC derivatives and ETDs
• D. Equities and bonds

Answer: (C)

Derivatives are categorized by how they are traded. The two main categories are exchange-traded derivatives (ETDs), which are standardized contracts traded on organized exchanges and typically cleared through a central counterparty, and over-the-counter derivatives (OTC), which are privately negotiated between parties with terms tailored to their needs. This market-structure split explains why futures and options often fall under the exchange-traded side, while many swaps and bespoke contracts sit in the OTC category. Equities and bonds are not derivatives themselves—they’re underlying assets that derivatives can be based on.