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Derivatives




CTD


It stands for cheapest to deliver; a procedure which is used to find out which debt instrument (government bonds, corporate bonds, etc) is most rewarding (cheapest) to deliver against a derivative contract. For an investor under obligation to supply the subject matter of such a contract, the underlying asset can be chosen to be the least expensive among a broad array of available instruments.

The holder of a derivative product has the right, on specific arrangements, to decide which underlying to deliver from a bunch of different types of assets or securities at the predetermined delivery date.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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