Contract For Difference

From Open Risk Manual

Definition

Contract For Difference. Cash settled contract where you buy or sell control of a particular asset such as USD. Further notes: You don't expect to deliver it, instead, at the end of the stated period you will take the current market value of the asset and pay the difference between the current market value and the value that you contracted for. Review session notes: Q: What are they? A: Cash settled contract where you buy or sell control of a particular asset such as USD. You don't expect to deliver it, instead, at the end of th estated period you will take the current market value of the asset and pay the difference between the current market value and the value that you contracted for. Just the same as a non deliverable forward. Differences: CFD are more a retail based product, they don't speciy a delivery date, they roll on a daily basis, the holder pays a margin but they don't determine the date where you have to settle. They rollover each day, but each day the holder has to provide a margin (and fees). Can roll along as long as you like, squaring up the current value and roll on for next day. No option to gake any value out of it. You can choose to terminate it, at which point youclear it at its current market value on that day and don't roll it over for the next. Developed to allow peopl ewho don't have the ability to hold the cash, to run a balance in a foreign ccy. What sort of assets? 1. Currency 2. No others known. Logically possible. Can be equity or anything. Q: What sort of facts apply: Delivery dates Quantities For non uniform assets: grades or qualities of those assets (e.g. oil0 Counterparties Earlier notes: Notes taken during Traded options SME Review: Traded in Australia and LSE. Presently these are predominantly OTC.


Synonyms

  • Forward Contract For Difference

Disclaimer

This entry annotates a FIBO Ontology Class. FIBO is a trademark and the FIBO Ontology is copyright of the EDM Council, released under the MIT Open Source License. There is no guarantee that the content of this page will remain aligned with, or correctly interprets, the concepts covered by the FIBO ontology.

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