Cheapest to Deliver (CTD)

For some physical commodity and fixed income derivatives contracts, a variety of 'grades' of the underlying can be delivered at any of several delivery points, or a number of eligible bonds or notes can be delivered in satisfaction of the short's obligation. The market price of the derivative contracts reflects the assumption that the delivery requirement will be met by the short in the form of the cheapest commodity grade or instrument to deliver. Also called Best Bond to Deliver. See also Deliverable, Delivery Option.

Glossary * C