In finance, a contingent claim is a derivative whose future payoff depends on the value of another “underlying” asset,[1][2] or more generally, that is dependent on the realization of some uncertain future event.[3] These are so named, since there is only a payoff under certain contingencies.[4] Any derivative instrument that is not a contingent claim is called a forward commitment.[3]
The prototypical contingent claim is an option,[1] the right to buy or sell the underlying asset at a specified exercise price by a certain expiration date; whereas (vanilla) swaps, forwards, and futures are forward commitments, since these grant no such optionality.[3]
Contingent claims are applied under financial economics in developing models and theory, and in corporate finance as a valuation framework. This approach originates with Robert C. Merton, [5] decomposing the value of a corporate into a set of options in his "Merton model" of credit risk.