Contracts for Difference – CFD

It is a contract (agreement) to exchange mutually the difference (positive or negative) between the opening and closing price of the financial instrument of the traded underlying asset, which could be, for example, shares, indices or commodities. It is a financial instrument very similar to futures, but it is not standardised and is used especially in electronic over-the-counter trading and therefore, also the risks are similar to standardised derivatives. However, they include additional credit risk.