Must the underlier of a derivative transaction be an asset that can be delivered at maturity?

If so, explain why. If not, explain what happens when the contract matures. What are the
two major requirements for an underlier to be successful?

What will be an ideal response?

The underlier does not have to be deliverable at maturity. For example, weather, credit,
and stock index derivatives have underliers that would be impossible or difficult to deliver. When a derivative contract on a nondeliverable underlier matures, it is settled in cash. The two major requirements for a successful underlier are it has to be something that can be quantified, and many people have to want to buy and sell derivatives based on this quantified measure.