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Cash settlement |
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Cash SettlementThe process by which the terms of an option contract are fulifilled through the payment or receipt in dollars of the amount by which the option is in-the-money as opposed to delivering or receiving the underlying stock.Cash settlementDeals on an exchange where investors are obliged to settle immediately rather than on account.An expression used in futures and options trading which applies when physical delivery is impractical and contracts are settled by attaching a monetary value.Similar MatchesRolling settlementRolling settlementSettlement is the process by which investors pay for shares they have bought and receive payment for shares they have sold. Before July 1994, this process was done by means of an 'account period', normally ten working days. All the transactions during that period were balanced against each other to produce a single figure, which was either paid to the investor or due from him, depending on whether the value of his purchases was higher or lower than the value of his sales in the period. One of the features of the account period was that transactions taking place at the beginning of it (say, Day 1) didn't have to be settled until about 14 days later, whereas transactions at the end (say Day 10) had to be settled within 4 days.In July 1994, the account period system was replaced by ten day (T+10) rolling settlement, which means that each transaction has to be settled ten days after the transaction date. This was subsequently reduced to five days (T+5) and in February 2001 was reduced to three days (T+3).These significance of rolling settlement and of shortened settlement times is that when investors sell shares, the proceeds get paid into their account quicker, and when they buy shares they have to pay for them quicker. It requires careful money management on the part of the investor. Skip day settlementSkip day settlementSettling a trade one business day beyond what is normal. Exchange Delivery Settlement PriceExchange Delivery Settlement PriceThe price which determines the price for physical delivery of the underlying instrument or the price at which contracts are cash settled. Settlement riskSettlement riskThe risk that one party will deliver and the counterparty will not be able to pay and vice versa. Structured settlementStructured settlementAn agreement in settlement of a lawsuit involving specific payments made over a period of time. Property and casualty insurance companies often buy life insurance products to pay the costs of such settlements. Further SuggestionsSettlement optionsImmediate settlement Cash settlement contracts Regular way settlement Settlement rate Dispute settlement Continuous net settlement (CNS) settlement options Settlement date Cash sale or settlement Bank for International Settlements Uniform Settlement Statement Good delivery and settlement procedures Real Estate Settlement Procedures Act (RESPA) Next day settlement Insurance settlement Short settlement Dispute Settlement Body Exercise settlement amount Settlement price Regular settlement Dispute settlement mechanism Settlement Bank for International Settlements (BIS) Same Day Funds Settlement (SDFS) |
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