Physical Delivery
· It requires the actual underlying asset to be delivered on the specified delivery date, most common with commodities and other financial instruments
· Most derivatives are not actually exercised, but are traded out before their delivery dates.
· Settlement by physical delivery is carried out by clearing brokers or their agents.
Cash Settlement
It requires the counterparties to the contract to net out the cash difference in the value of their positions. The appropriate party receives the cash difference.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment