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Physical settlement
The closing of a position in a derivative whereby the seller delivers the underlying asset against payment by the buyer of the forward price or the exercise price specified at the inception of the contract in the case of a forward or an option contract respectively, or of the final settlement price in the case of a futures contract.
Derivatives that do not involve a deliverable asset, for example stock index futures or options, are designed to be settled in cash at maturity.
Translations
Synonyms and variations
- Delivery
- Physical delivery