Insights

September 2, 2020

Price volatility
If prices would not move, there would be no price risk. In markets where the price level is regulated and, consequently, fixed for the remainder of the year, price volatility does not exist.
August 19, 2020

Radical uncertainty
Risk is not a synonym for uncertainty, because risk can be quantified, whereas uncertainty cannot. Risk quantification is based on a formula including ‘probability’ and ‘effect’.
August 5, 2020

Open interest
The moment a futures contract, an option contract or a swap agreement is entered into by buyer and seller, a position is opened.
July 22, 2020

Exchange of futures for physicals
An exchange of futures for physicals (EFP) is a transaction process allowed by an exchange to enable market participants to manage their market risk with direct reference to the price of an underlying physical transaction.
July 8, 2020

Settlement
In the commodity business, settlement is one of the main processes in deal-making. Settlement is the actual process that provides the final completion of a transaction; the unwinding of the transaction.
June 24, 2020

Margining
In order to guarantee the duties of a clearing house, market participants need to arrange for a guarantee for each position, for instance, being commodity (derivatives) contract.
June 10, 2020

Clearing
In the field of trading operations, clearing of transactions is a very important process. Clearing is often considered guaranteeing the settlement of a contract between two parties, like a form of insurance.
May 27, 2020

Counterparty risk & credit support
Counterparty risk consists of delivery risk for the buyer and credit risk for the seller. These risks have to be managed by those parties who are involved with it.
May 13, 2020

Trade & risk management solutions
Commodity trading can be considered a business function. As with any business, it has to be checked and verified by control functions and it has to be given assistance by support functions.
April 29, 2020

Trade Operations
Typical commodity & energy trade operations are quite diverse.
April 15, 2020

Cost of Carry
A rational market participant should be indifferent to buy an asset now or in time. Pricing of products should be accordingly, including commodities and financial instruments.
April 1, 2020

Options – Tools to speculate or hedge
Options can be used to create an exposure (and, thus, to speculate), but, alternatively, they can be applied as an instrument to hedge an exposure.
June 17, 2019

Commodification
‘Commoditisation’, or ‘commodification’, concerns a process of standardisation or creating fungibility.
May 20, 2019

The supply chain
The supply chain, or the value chain, concerns the system of organisations, people, technology, activities, information and resources …
April 30, 2019

Classification of commodities
Commodities themselves can also be classified. As always, classifications can be made in various ways.
April 2, 2019

Classification of assets
In order to understand the place of the commodity markets, one needs to consider the bigger picture.
March 4, 2019

Classification of natural resources
Natural resources can be classified in a variety of ways. All of these categorisations are set out in this article.