Contract for Difference (CFD)
A contract for difference is a leveraged OTC derivative that settles the price change in an underlying reference without transferring ownership.
Equity derivatives, CFDs, equity-linked notes, and weather contracts use different legal forms to transfer market or index-linked exposure.
Equity-linked and contract derivatives transfer price, return, or index exposure without necessarily transferring ownership of the referenced asset. The legal form matters: an equity derivative may be a listed or bilateral contract, a CFD is commonly an OTC agreement with a provider, an equity-linked note is issuer debt, and a weather derivative settles from a measured weather index.
Start with Underlying Asset to distinguish the payoff reference from the deliverable, collateral, or assets owned by an issuer.
| Article | Main question |
|---|---|
| Equity Derivative | Does the contract reference a stock, equity index, basket, or equity return? |
| Contract for Difference (CFD) | How does a leveraged provider contract settle the change between opening and closing prices? |
| Equity-Linked Note (ELN) | How do issuer debt and an embedded equity-linked payoff combine? |
| Weather Derivative | How does a temperature, rainfall, snowfall, or wind index determine settlement? |
| Contract form | What the holder owns | Central risk beyond the reference |
|---|---|---|
| Listed equity future or option | A cleared derivative position | Margin, liquidity, exercise, and settlement rules |
| OTC equity swap or CFD | A contractual claim against a counterparty or provider | Counterparty, pricing, financing, collateral, and closeout terms |
| Equity-linked note | An issuer debt claim with an embedded payoff | Issuer credit, note liquidity, valuation, call, and payoff complexity |
| Weather derivative | An exchange-traded or bilateral index contract | Station, measurement, formula, basis, and data risk |
Similar market exposure can therefore produce different ownership rights, insolvency treatment, costs, tax consequences, and liquidity. A price chart alone cannot show those differences.
This section is educational and does not provide personalized investment, legal, tax, accounting, valuation, derivatives, or securities advice.
Choose a subsection first. Deeper term pages live inside each subsection, which keeps large topic hubs readable.
A contract for difference is a leveraged OTC derivative that settles the price change in an underlying reference without transferring ownership.
An equity derivative is a contract whose value or cash flows depend on a stock, equity index, basket, dividend, or other equity-linked reference.
An equity-linked note is issuer debt whose coupons or repayment depend on a stock, equity index, basket, or embedded option formula.
A weather derivative pays from a defined weather index, allowing businesses to transfer temperature, rainfall, snowfall, or wind-related financial risk.