Answer: An option contract

Derivative contracts can be categorized into two types: firm commitments and contingent claims. Firm commitments include forward contracts, futures contracts, and swaps, which involve a periodic exchange of cash flows. In contrast, a contingent claim is a derivative where one counterparty decides whether and when the trade will settle. An option is the primary example of a contingent claim, as it grants the holder the right, but not the obligation, to execute the trade.

Author: LeetQuiz Editorial Team