Glossary: CFD

A complicated financial instrument, Contracts for difference are a specific type of derivative. They were developed to allow the capital benefits of investing in an asset without actually physically having to own or pay full price for it. A CFD is a contract between a buyer and seller, stipulating the buyer will pay to the seller the difference between the current value of an asset (share, bond, commodity, index) and its value at contract time. If the difference is negative, then the seller pays the buyer).

Relevant to: Stocks & shares

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