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Physical Settlement
Practical Law Glossary Item 1-386-7069 (Approx. 3 pages)
Glossary
Physical Settlement
Also known as physical delivery. A manner of settling a derivative transaction under which physical delivery of the referenced commodity or obligation is contemplated under the contract. The following types of derivatives transactions may be physically settled:
- Equity derivatives – by delivery of the underlying/referenced security or securities.
- Credit derivatives – by delivery of the deliverable obligation.
- Commodity derivatives – by delivery of the physical commodity specified in the contract.