What Is the Difference between an Underlying Asset and a Reference Rate? ▴ Learn

What Is the Difference between an Underlying Asset and a Reference Rate?

The underlying asset is the actual item being traded or referenced in the derivative contract, such as a single Bitcoin. A reference rate is an independently calculated price derived from aggregating data across multiple venues for that underlying asset.

The reference rate is used primarily for cash settlement, while the underlying asset is used for physical settlement.

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What Is the Benchmark Used for Determining the Final Price in Cash Settlement?