| Forward commitment | A derivative in which both parties are obligated to transact at a future date at terms set today; includes forwards, futures, and swaps |
| Contingent claim | A derivative whose payoff depends on whether a specific event or condition occurs; the holder has a right but not an obligation (e.g., options, CDS) |
| Forward contract | An OTC agreement obligating one party to buy and another to sell an underlying asset at a specified price (F0(T)) on a future date (T) |
| Futures contract | A standardized, exchange-traded forward commitment with daily mark-to-market settlement and clearinghouse guarantee |
| Swap | An OTC agreement to exchange a series of cash flows over multiple periods; effectively a portfolio of forward contracts |
| Option | A contract giving the buyer the right, but not the obligation, to buy (call) or sell (put) an underlying at a specified price on or before a specified date |
| Call option | An option giving the holder the right to buy the underlying at the strike price |
| Put option | An option giving the holder the right to sell the underlying at the strike price |
| European option | An option that can be exercised only at expiration |
| American option | An option that can be exercised at any time up to and including expiration; always worth at least as much as an otherwise identical European option |
| Strike (exercise) price | The predetermined price at which the option holder can buy (call) or sell (put) the underlying (X) |
| Option premium | The price paid by the option buyer to the option seller for the rights conveyed by the option |
| Initial margin | The deposit required to enter a futures position |
| Maintenance margin | The minimum margin account balance; breaching triggers a margin call |
| Mark-to-market (MTM) | The daily settlement process in futures markets where gains and losses are credited/debited to margin accounts |
| Margin call | A demand to restore the margin account to the initial margin level after it falls below the maintenance margin |
| Physical settlement | Settlement by actual delivery of the underlying asset |
| Cash settlement | Settlement by a cash payment equal to the difference between the contract price and the market price |
| Credit default swap (CDS) | A derivative providing insurance-like protection against credit events of a reference entity; protection buyer pays periodic premiums |
| Payoff | The cash flow received at expiration or settlement of a derivative, before accounting for the initial cost |