Task: Class Definition Understanding (ontology: Business_Finance/Financial_Industry_Business_Ontology)

Which of the following definitions best describes 'contract for difference'?

A. financial instrument that provides the holder the privilege to subscribe to or to receive specific assets on terms specified
B. derivative instrument that is a privately held, negotiable bilateral contract traded over-the-counter (OTC) between two parties in a creditor/debtor relationship, enabling the creditor to effectively transfer some or all of the risk of a debtor defaulting to a third party
C. cash-settled derivative where the parties agree to exchange on the maturity of the contract the difference between the current value of the underlying asset and the initial value of that asset when the contract is initiated
D. derivative instrument that obligates the buyer to receive and the seller to deliver the assets specified at an agreed price, at some later point in time

Answer: cash-settled derivative where the parties agree to exchange on the maturity of the contract the difference between the current value of the underlying asset and the initial value of that asset when the contract is initiated