What Is a “Non-Deliverable Forward” (NDF) and How Is It Similar to Cash-Settled Crypto Futures?
A Non-Deliverable Forward (NDF) is a cash-settled short-term forward contract, typically used for currencies where transfer is restricted. At maturity, the profit or loss is calculated by comparing the NDF rate to the prevailing spot rate, and the difference is settled in a freely convertible currency.
This is similar to cash-settled crypto futures, where no physical asset is exchanged, only the cash difference.
Glossar
NDF
Valuation ⎊ Non-Deliverable Forwards (NDFs) represent a forward contract settled in a freely convertible currency, frequently utilized when direct deliverability of the underlying currency is restricted due to capital controls or regulatory limitations.
Non-Deliverable Forward
Contract ⎊ A Non-Deliverable Forward (NDF) is a bilateral, over-the-counter financial derivative agreement to exchange the difference between an agreed-upon forward price and the actual spot price of an underlying asset, such as a cryptocurrency, on a specified future date.
Non-Deliverable Option
Framework ⎊ Non-deliverable options (NDOs) within cryptocurrency represent a specialized class of derivatives contracts where physical delivery of the underlying asset ⎊ typically a cryptocurrency ⎊ is explicitly excluded.
Short-Term Forward
Contract ⎊ A short-term forward is a customized, over-the-counter derivative contract obligating two parties to transact an asset at a specified price on a future date, typically within a short time horizon, often less than three months.