Cash Settlement
Cash settlement is a method of settling a derivatives contract by paying the net cash value at expiration, rather than delivering the underlying asset. The payment is derived from the difference between the contract price and the final settlement price or index value.
Example: Example: A cash-settled futures contract with a multiplier of $50 and a contract price of 4,500 settles at 4,510; the long position receives (4,510 − 4,500) × 50 = $500.
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