Derivatives

Cash Settlement

Definition

What is Cash Settlement?

Settlement through a cash payment rather than delivery of the underlying asset.

Example in practice

An index future settles in cash because the index itself cannot be delivered.

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A contract whose value depends on an underlying asset, rate, index, or event.

The asset, rate, index, or reference on which a derivative's value is based.

The reference amount used to calculate derivative payments, which may exceed the cash initially exchanged.

A strategy that owns the underlying asset and sells call options against it.

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