BAX Contract


DEFINITION of 'BAX Contract'

A BAX contract is a short-term investment instrument that uses a Canadian banker's acceptance (BA) as its underlying security. The specific BA underlying the contract has a nominal value of C$1 million and a maturity of three months. The contracts are traded on the Montreal Derivatives Exchange.

Also known as a "banker's acceptance contract".


These contracts are great way for a company to hedge against a rise in interest rates. BAX contracts are becoming increasingly popular because they are a less expensive hedge than their over-the-counter competition, forward rate agreements. BAX contracts are also very liquid, flexible, and do not tie up credit lines.

  1. Maturity

    The period of time for which a financial instrument remains outstanding. ...
  2. Derivative

    A security with a price that is dependent upon or derived from ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change ...
  4. Nominal Value

    The stated value of an issued security. Nominal value in economics ...
  5. Hedge

    Making an investment to reduce the risk of adverse price movements ...
  6. Banker's Acceptance - BA

    A short-term debt instrument issued by a firm that is guaranteed ...
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