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".

BREAKING DOWN 'BAX 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.

RELATED TERMS
  1. Contract Unit

    The actual amount of the underlying asset represented by a single ...
  2. Delivery Date

    1. The final date by which the underlying commodity for a futures ...
  3. Fixed Income Forward

    A contract to buy or sell a fixed income security in the future ...
  4. Forward Market

    An over-the-counter marketplace that sets the price of a financial ...
  5. Contract Month

    The month in which a futures contract expires. The contract can ...
  6. Forward Exchange Contract

    A special type of foreign currency transaction. Forward contracts ...
Related Articles
  1. Investing Basics

    Explaining Banker's Acceptances

    A banker’s acceptance (BA) is a way for two unfamiliar parties to transact business on credit.
  2. Retirement

    Money Market: Banker's Acceptance

    A bankers' acceptance (BA) is a short-term credit investment created by a non-financial firm and guaranteed by a bank to make payment. Acceptances are traded at discounts from face value ...
  3. Term

    The Difference Between Forwards and Futures

    Both forward and futures contracts allow investors to buy or sell an asset at a specific time and price.
  4. Options & Futures

    Beginner's Guide To Trading Futures: The Basic Structure of the Futures Market

    In this opening section, we will take a look at how the futures market works, how it differs from other markets and how the use of leverage impacts your investing. How Futures WorkYou are probably ...
  5. Options & Futures

    Beginner's Guide To E-Mini Futures Contracts: E-Mini Specifications

    Each e-mini contract has certain specifications as outlined by its host exchange. Ticker SymbolEach contract has a ticker symbol, or an arrangement of letters representing the specific contract. ...
  6. Options & Futures

    Examples Of Exchange-Traded Derivatives

    We look at some of the most common exchange-traded derivatives.
  7. Investing

    How Do Futures Contracts Work?

    Futures contracts are one of the most important financial innovations in history, but they are often misunderstood. Find out this contract is used to transfer risk between different parties. ...
  8. Options & Futures

    How to Trade Futures Contracts

    Futures is short for Futures Contracts, which are contracts between a buyer and seller of an asset who agree to exchange goods and money at a future date, but at a price and quantity determined ...
  9. Options & Futures

    Fueling Futures In The Energy Market

    The energy market influences every aspect of our lives, and these four options are its driving force.
  10. Forex Strategies

    An Introduction To Trading Forex Futures

    We explain what forex futures are, where they are traded, and the tools you need to successfully trade these derivatives.
RELATED FAQS
  1. How do the investment risks differ between options and futures?

    Learn what differences exist between futures and options contracts and how each can be used to hedge against investment risk ... Read Answer >>
  2. How can a futures trader exit a position prior to expiration?

    A futures contract is an agreement to buy or sell a commodity at a pre-determined price and quantity at a future date in ... Read Answer >>
  3. What is a forward contract against an export?

    Understand forward exchange contracts in exporting, and learn the purpose of using a forward contract and its advantages ... Read Answer >>
  4. What kinds of derivatives are traded on an exchange?

    Learn about the different types of derivatives traded on exchanges, including options and futures contracts, and discover ... Read Answer >>
  5. What kinds of derivatives are types of forward commitments?

    Learn more about what a derivative is, what a forward commitment is and which types of derivative securities have forward ... Read Answer >>
  6. How are forward contracts regulated in the United States?

    Read about the risks of forward contracts and why they are not readily subject to regulation, including what happens when ... Read Answer >>
Hot Definitions
  1. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  2. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  3. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  4. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  5. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  6. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
Trading Center