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Cash Settlement
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(1) In contrast to traditional stock and bond option contracts and most commodity futures, many currency, fixed-income, and stock index options and financial futures contracts are settled with a cash payment based on the difference between the settlement price and the strike (options) or the settlement price and the previous settlement price (futures). See Cash Settled Option. (2) An alternative to activating a swap at the expiration of a swaption is to survey the market and calculate the cash value of the swaption which is paid to the holder upon exercise. (3) Delivery of securities against cash for settlement on the trade date. Also called Same Day Settlement.
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