How Do Hash Functions Used in Financial Derivatives Ensure Data Integrity?

Hash functions are used to create a unique, fixed-length fingerprint of complex financial contract data, such as an Options Trading agreement. This fingerprint, or hash, ensures that the contract's terms have not been tampered with.

If even a single character in the contract is changed, the resulting hash will be completely different. This allows counterparties to quickly verify the integrity and authenticity of the derivative agreement.