Cash Settlement

This Issue in United States

Concept of Cash Settlement in Futures Trading

In this context of financial law, the following is a definition of Cash Settlement: A method of settling futures, options and other derivatives whereby the seller (or short) pays the buyer (or long) the cash value of the underlying commodity or a cash amount based on the level of an index or price according to a procedure specified in the contract. Also called Financial Settlement. Compare to Physical Delivery.

Cash Settlement

Concept of Cash Settlement in the context of derivatives contract, by the International Swaps and Derivatives Association (ISDA): The discharge of an obligation by payment or receipt of a net cash amount instead of payment or delivery by both parties.

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See Also

• Derivatives Contract