A study on commodity derivative market

Complexity obscures the evaluation of efficient results. A few years ago I happened to be at a conference of business people, not financial people, and I was making a presentation.

Derivatives do not eliminate risk. Similarly, the buyer of a put option has the right to sell a certain quantity of an underlying asset, at a specified price on or before a given date in the future, but he has no obligation to carry out this right.

Banks protect themselves with margins, thresholds and credit triggers. In just about every case the index is in fact a Commodity Futures Index. These track the performance of an underlying commodity index including total return indices based on a single commodity.

This facile description is constantly parroted by academics and policy makers. This confirmed what was commonly understood to be true.

Cash commodity[ edit ] Cash commodities or "actuals" refer to the physical goods—e.


Credit rating agencies often urge this use of derivatives. In many cases, the HFT algorithms are designed to manipulate individual transactions. Apart from the commonly used short-dated options which have a maximum maturity period of one year, there exist certain long-dated options as well, known as warrants.

At the same time investors supply new capital funds by putting money into the pipeline to acquire the newly issued securities. This expected value is measured by statistical algorithms.

Since that time traders have sought ways to simplify and standardize trade contracts. This is reminiscent of subprime mortgage loans that were at the center of the financial crisis. They are less likely to be subject to public scrutiny. It is completely unrealistic to believe that participants in the derivatives markets accurately value the transactions that they enter into.

Under these circumstances there is an inherent bias toward risk taking by large financial institutions: At inception, the expected amount to be paid by Party B is the same as the fixed amount to be paid by Party A.

Therefore, the value or cost of any credit extension also has no cap. Derivatives, financial instruments that detach the price risks and rewards from assets so that these risks and rewards can be allocated to a party without regard to interests in the underlying asset.

Commodity exchanges themselves were a relatively recent invention, existing in only a handful of cities.This is the third of several papers examining the underlying validity of the assertion that regulation of the financial markets is unduly burdensome.

These papers assert that the value of the financial markets is often mis-measured. Stocks Options Chart for the derivative stocks with Intraday Bytes: NSE Stocks and Indices to help you decide which stocks to buy. Commodity Exchange occupies % share in the domestic Commodity Derivative Market, leading the Indian Commodity Derivative Exchanges in terms of turnover and the number of contracts traded as indicated in Table 1.

Derivative (finance)

Noun. The word “childish” is a derivative of “child.” Tofu is one of many soybean derivatives. Petroleum is a derivative of coal tar.

Adjective. A number of critics found the film derivative and predictable. His style seems too derivative of Hemingway. § Books and records; keeping and inspection. Link to an amendment published at 82 FRMay 30, (i) The term “micrographic media” means microfilm or microfiche or any similar medium.

(ii) The term “electronic storage media” means any digital storage medium or system that: (A. Register with us today and in less than 60 seconds continue your access to: Latest news headlinesAnalytical topics and featuresCommodities videos, podcast & blogsSample market prices & dataSpecial reportsSubscriber notes & daily commodity email alerts.

A study on commodity derivative market
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