What Is Delivery versus Payment (DVP) and How Is It Applied in Digital Asset RFQ Trades?
Delivery Versus Payment (DVP) is a settlement mechanism ensuring that the delivery of the asset occurs only if the corresponding payment is made. In digital asset RFQ trades, this principle is crucial for minimizing settlement risk.
It is often implemented via segregated accounts or atomic settlement mechanisms. The transfer of the derivative or underlying asset and the transfer of payment are synchronized.
Glossar
Segregated Accounts
Account ⎊ Segregated accounts, within the context of cryptocurrency, options trading, and financial derivatives, represent a distinct allocation strategy designed to isolate assets or funds from broader operational or trading activities.
Atomic Settlement
Execution ⎊ The simultaneous exchange of assets occurs only when all predefined conditions of a smart contract are met.
Delivery versus Payment
Settlement ⎊ The Delivery versus Payment (DvP) framework, prevalent in cryptocurrency derivatives, options trading, and broader financial derivatives markets, synchronizes the physical or digital asset delivery with the corresponding payment.
Digital Asset
Asset ⎊ A digital asset, within the convergence of cryptocurrency, options trading, and financial derivatives, represents a quantifiable, tradable entity existing primarily in digital or electronic form.
Central Counterparty Clearing
Mitigation ⎊ Central Counterparty Clearing (CCP) within cryptocurrency derivatives functions as a multilateral intermediary, interposing itself between counterparties in trades to reduce systemic risk.
Payment
Settlement ⎊ Payment within cryptocurrency, options trading, and financial derivatives represents the actual transfer of value, typically digital assets or fiat currency, to fulfill contractual obligations arising from a trade or contract execution.