Derivatives
Physical Settlement
Definition
What is Physical Settlement?
Settlement by delivering the underlying assetThe asset, rate, index, or reference on which a derivative's value is based..
Example in practice
How This Looks in Practice
A physically settled commodityA standardised physical good such as gold, crude oil, wheat, or cocoa. future may require delivery of oil.
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Related Terms
Derivatives
Derivative
A contract whose value depends on an underlying asset, rate, index, or event.
DerivativesUnderlying Asset
The asset, rate, index, or reference on which a derivative's value is based.
DerivativesNotional Amount
The reference amount used to calculate derivative payments, which may exceed the cash initially exchanged.
Derivatives StrategiesCovered Call
A strategy that owns the underlying asset and sells call options against it.