Commodity markets provide tools for producers, processors, and traders to manage price risk. [1] Structured finance techniques help transfer risks from parties less able to support risks to those more equipped to do so. [2] Key hedging tools include futures, options, and swaps traded on exchanges or over-the-counter. [3] While these tools can effectively hedge price exposure, their use also brings complexity, margin requirements, and other challenges.
Gold prices have risen significantly in recent years due to several factors. A weak US dollar, low interest rates, high inflation, economic crises and falling gold supply have increased demand for gold as a hedge. Additionally, festivals and traditions in India create seasonal demand spikes. Investors see gold as a stable, liquid, secure investment that is not subject to income tax.
This document discusses capital adequacy ratio (CAR) and non-performing assets (NPAs). It defines CAR as a ratio of a bank's capital to its risk-weighted assets that regulators use to ensure banks can absorb losses. It discusses the types of capital (Tier I and Tier II), risk weights, and implications of not meeting CAR norms. Methods to improve CAR include mergers, better asset management, improved NPA recovery, recapitalization, and raising funds. NPAs are defined as loans overdue over 90-180 days. Factors contributing to NPAs include political interference, willful defaults, targeted lending, lack of monitoring, and hiding NPAs.
This document provides an overview of the currency futures market in India. It discusses key topics such as the introduction of currency derivatives, the foreign exchange market, the history of currency futures in India, contract specifications, factors affecting exchange rates, clearing and settlement processes, trading strategies, and the growth of the currency futures market. The overall objective is to understand how the currency futures market functions in India and the various strategies used by traders.
This document provides an overview of foreign exchange markets, including key participants, factors that influence exchange rates, and types of exchange rates. It discusses major world currencies, direct and indirect exchange rate methods, and spot and forward delivery. Key entities that govern the foreign exchange market in India are also outlined, such as the Reserve Bank of India and Foreign Exchange Dealers Association of India. The 24-hour global nature of the foreign exchange market and its lack of a physical location are highlighted.
This presentation is a comprehensive presentation of Forex Market. It starts with the history of this market from Pre Gold period, Bretton wood till current floating exchange mechanism and in Indian perspective FERA and FEMA. It then gives you an idea on size, width and extent of this market and post that it covers forex exchange, quotes, and numerical. Finally, it covers few topics like Trade Finance, LIBOR, Balance of Payment & Currency Swaps
Gold can be invested in through various channels like bars, coins, accounts, exchange traded products, certificates, derivatives and mining companies. The price of gold is affected by factors like international prices, interest rates, dollar-rupee dynamics, central bank reserves and demand for the metal. Evaluating gold's performance over different time periods shows it has a low correlation with other commodities and assets like stocks, moving more independently based on its safe haven status.
The document discusses various commodity derivatives markets and exchanges around the world. It provides details on the National Commodity and Derivatives Exchange of India (NCDEX) and Multi Commodity Exchange of India (MCX), including the commodities traded and clearing/settlement processes. It also summarizes information on the Tokyo Commodity Exchange (TOCOM) and contracts traded there such as gold and rubber. Finally, it outlines the Dalian Commodities Exchange in China and types of contracts traded including corn, soybeans, and crude soybean oil.
The document provides an overview of various international financial markets including the foreign exchange market, Eurocurrency market, Eurocredit market, Eurobond market, and international stock markets. It discusses the motives for investors, creditors, and borrowers to use these international markets and how they allow funds to flow more freely globally. The summary briefly outlines some of the key international financial markets and their roles in facilitating international investment and trade.
Gold prices have risen significantly in recent years due to several factors. A weak US dollar, low interest rates, high inflation, economic crises and falling gold supply have increased demand for gold as a hedge. Additionally, festivals and traditions in India create seasonal demand spikes. Investors see gold as a stable, liquid, secure investment that is not subject to income tax.
This document discusses capital adequacy ratio (CAR) and non-performing assets (NPAs). It defines CAR as a ratio of a bank's capital to its risk-weighted assets that regulators use to ensure banks can absorb losses. It discusses the types of capital (Tier I and Tier II), risk weights, and implications of not meeting CAR norms. Methods to improve CAR include mergers, better asset management, improved NPA recovery, recapitalization, and raising funds. NPAs are defined as loans overdue over 90-180 days. Factors contributing to NPAs include political interference, willful defaults, targeted lending, lack of monitoring, and hiding NPAs.
This document provides an overview of the currency futures market in India. It discusses key topics such as the introduction of currency derivatives, the foreign exchange market, the history of currency futures in India, contract specifications, factors affecting exchange rates, clearing and settlement processes, trading strategies, and the growth of the currency futures market. The overall objective is to understand how the currency futures market functions in India and the various strategies used by traders.
This document provides an overview of foreign exchange markets, including key participants, factors that influence exchange rates, and types of exchange rates. It discusses major world currencies, direct and indirect exchange rate methods, and spot and forward delivery. Key entities that govern the foreign exchange market in India are also outlined, such as the Reserve Bank of India and Foreign Exchange Dealers Association of India. The 24-hour global nature of the foreign exchange market and its lack of a physical location are highlighted.
This presentation is a comprehensive presentation of Forex Market. It starts with the history of this market from Pre Gold period, Bretton wood till current floating exchange mechanism and in Indian perspective FERA and FEMA. It then gives you an idea on size, width and extent of this market and post that it covers forex exchange, quotes, and numerical. Finally, it covers few topics like Trade Finance, LIBOR, Balance of Payment & Currency Swaps
Gold can be invested in through various channels like bars, coins, accounts, exchange traded products, certificates, derivatives and mining companies. The price of gold is affected by factors like international prices, interest rates, dollar-rupee dynamics, central bank reserves and demand for the metal. Evaluating gold's performance over different time periods shows it has a low correlation with other commodities and assets like stocks, moving more independently based on its safe haven status.
The document discusses various commodity derivatives markets and exchanges around the world. It provides details on the National Commodity and Derivatives Exchange of India (NCDEX) and Multi Commodity Exchange of India (MCX), including the commodities traded and clearing/settlement processes. It also summarizes information on the Tokyo Commodity Exchange (TOCOM) and contracts traded there such as gold and rubber. Finally, it outlines the Dalian Commodities Exchange in China and types of contracts traded including corn, soybeans, and crude soybean oil.
The document provides an overview of various international financial markets including the foreign exchange market, Eurocurrency market, Eurocredit market, Eurobond market, and international stock markets. It discusses the motives for investors, creditors, and borrowers to use these international markets and how they allow funds to flow more freely globally. The summary briefly outlines some of the key international financial markets and their roles in facilitating international investment and trade.
“NIRAV MODI & THE PUNJAB NATIONAL BANK FRAUD”Vatsal Patel
Nirav Modi, an Indian diamond jewellery designer, is at the center of one of India's largest banking frauds detected so far totaling over $1.77 billion. He grew his business significantly over the years but is now accused of defrauding Punjab National Bank by using fraudulent Letters of Undertaking to obtain loans from other Indian banks. The fraud was allegedly carried out through a PNB branch in Mumbai over a period of several years, with transactions not being recorded in the bank's core banking system, allowing the fraud to go undetected for a long time. Investigations are ongoing into Modi's business dealings and how this large scale fraud was able to be perpetrated.
1) The document discusses various principles of lending that banks follow such as safety, liquidity, profitability, security, purpose of loan, social responsibility, and risk diversification.
2) It also describes different types of loans and advances provided by banks including cash credits, overdrafts, bill discounting, letters of credit, and term loans.
3) The evaluation of borrowers, types of securities, and RBI's role in selective credit control are also summarized.
Know Your Customer (KYC) refers to banks obtaining identifying information from customers to prevent money laundering and financing of terrorism. The key aspects of KYC include:
1) Setting up a compliance unit to monitor accounts and transactions on an ongoing basis and update customer information regularly.
2) Obtaining proper identification and information about customers' employment/business when opening accounts or making significant changes.
3) Monitoring transactions to identify any that are unusually large or inconsistent with the customer's history.
This document discusses foreign exchange risk and its management. It begins by defining foreign exchange risk as the exposure of an institution to movements in foreign exchange rates. There are three main types of foreign exchange risk: translation exposure, transaction exposure, and economic exposure. The document then discusses various techniques for managing foreign exchange risk, including matching currency cash flows, currency swaps, forward exchange rate contracts, currency options, and more. The overall purpose is to outline the key risks and approaches taken to minimize the negative impacts of currency variations on companies' financial performance.
The document discusses several core investment banking services including domestic issue management, underwriting, global capital market offers, private placements, private equity advisory, buy-backs and de-listings, and corporate restructuring and mergers and amalgamations. It focuses on domestic issue management, elaborating on the definition of an issue and issue management. It notes the eligibility criteria for investment bankers to perform issue management including having a valid SEBI registration certificate and complying with codes of conduct. The document also discusses considerations for initial public offerings (IPOs) and follow-on public offerings (FPOs) including timing, pricing, and capital structure. It provides an overview of the regulatory framework for public offers in India and outlines important stages in
Module - 1 :
The foreign exchange market, structure and organization- mechanics of currency trading
– types of transactions and settlement dates – exchange rate quotations and arbitrage – arbitrage with and without transaction costs – swaps and deposit markets – option forwards – forward swaps and swap positions – Interest rate parity theory.
This document provides an overview of commodities trading in India, including the structure of the commodities market and major exchanges. It discusses opportunities for speculation, hedging, arbitrage, and diversification through commodities trading. Traders can implement strategies like going long, going short, calendar spreads, and taking advantage of correlations between commodities and other asset classes. Research on international and agricultural commodities is offered to help traders capitalize on market trends and opportunities.
This document provides an overview of several international financial markets including: the foreign exchange market, Eurocurrency market, Eurocredit market, Eurobond market, and international stock markets. It describes the motives and reasons for corporations and investors to use these international markets such as taking advantage of interest rate differences, currency fluctuations, and diversification benefits. The key international financial markets facilitate international trade, investment and borrowing activities.
The document discusses gold as an investment in India. It states that gold is the most favored investment instrument in India as it provides steady returns, liquidity, and satisfaction to buyers. It also diversifies investment portfolios. The document then discusses various ways to invest in gold, including physical gold and paper gold like gold ETFs, funds, and e-gold. It provides details on the features and performance of these paper gold instruments. The document concludes by discussing historical gold import data in India and factors that could influence future gold prices.
The document provides an overview of the commodity market in India, including:
1) It discusses what commodities are, traces of commodity trading in Indian history, and the significance of the commodity market in India, which involves over 50% of GDP.
2) It describes how commodity trading is controlled by national and regional exchanges regulated by the Forward Markets Commission (FMC), with the top 3 national exchanges holding over 90% of the market share.
3) It briefly outlines how commodity trading is done through various instruments on the exchanges and provides some tips for making money in the commodity market by investing in funds.
Why gold should be considered in an efficient portfolio to maximize the returns and minimize the risk? This ppt is able to answer this question to a great extent.
Harshad Mehta was an Indian stockbroker born in 1953 who triggered a securities scam in 1992 by diverting Rs. 4,000 crore from banks to inflate stock prices. He took advantage of loopholes in the banking system to siphoned money and bought shares, artificially raising prices. His actions were later exposed, causing the stock market to crash and devastating many investors. Mehta was charged with 72 criminal offenses and banned from trading, and his actions highlighted issues with regulation and oversight in the financial system.
Determinants of exchange rates - International Business - Manu Melwin Joymanumelwin
International parity conditions: Relative purchasing power parity, interest rate parity, Domestic Fisher effect, International Fisher effect. Though to some extent the above theories provide logical explanation for the fluctuations in exchange rates, yet these theories falter as they are based on challengeable assumptions [e.g., free flow of goods, services and capital] which seldom hold true in the real world.
This document provides an analysis of JPMorgan Chase & Co., including an overview of its business segments and the risks it faces. JPMorgan Chase has four main business segments: consumer and community banking, corporate and investment banking, commercial banking, and asset management. It faces various risks like credit, market, operational, and reputational risk. The document also discusses how JPMorgan Chase measures and protects itself against these risks, as well as the various regulators that oversee the company.
Introductory presentation on commodity tradingPradeep Sahoo
An introduction to Commodities Markets, Futures and other derivatives. Comparison of commodities with other asset classes and why commodity trading is indispensable for any country.
Demonetization is the discontinuation of a currency unit in circulation and replacing it with a new one. India demonetized 86% of its currency on November 8th, 2016 by removing Rs. 500 and Rs. 1000 notes from circulation. The major reasons for India's demonetization were to tackle issues like shadow economy, counterfeit currency, and terror financing. Some rationales included boosting bank deposits and savings, improving monetary transmission to reduce lending rates, and supporting government finances through increased tax collections. However, demonetization also caused short-term inconvenience and cash shortages that impacted businesses and daily wage earners.
The document discusses various aspects of foreign exchange including:
- The forex market trades over $4 trillion daily, more than the entire US GDP annually.
- Foreign exchange refers to trading one country's currency for another at exchange rates.
- In India, forex trading by individuals is considered illegal and punishable by imprisonment.
Indian markets have recently opened commodity derivatives, allowing retail investors to participate in commodity trading. Commodities such as copper, corn, and crude oil are traded on regulated exchanges like NCDEX, MCX, and NMCE. There are two main markets - the spot market where physical commodities are bought and sold for cash, and the futures market where contracts are made to buy/sell commodities at a future date and price. Exchanges have circuit filters of up to 6% to prevent large price fluctuations. Commodity derivatives provide exposure through futures, exchange traded funds, stocks of commodity companies, and mutual funds.
This document provides an overview of the Foreign Exchange Management Act (FEMA) of 1999 in India. It defines capital account transactions as those that alter assets or liabilities outside of India, and current account transactions as other payments like those related to trade, services, interest, travel expenses. FEMA restricts unauthorized dealing in foreign exchange. Exports must be declared with accurate value information. There are penalties for violations, and an appeal structure is outlined. The key differences between the old FERA and new FEMA are that FEMA aims to promote foreign trade and reserves with a more flexible approach, using residency rules of over 182 days rather than citizenship alone.
Warehouse Receipt and Collateral Managementdearasthana
Warehousing and collateral management play an important role in Indian agriculture by allowing for the storage of seasonal produce until consumption periods. The development of negotiable warehouse receipts and their dematerialization has improved post-harvest handling by facilitating credit access and linkages between spot and futures commodity markets. Extension professionals can educate farmers on utilizing warehouses, negotiable receipts, pledge financing, and commodity futures to avoid distress selling and better market their agricultural output.
Trade finance companies can be carefully fit to individual business necessities bringing about upgraded money related administration and enhanced income.
“NIRAV MODI & THE PUNJAB NATIONAL BANK FRAUD”Vatsal Patel
Nirav Modi, an Indian diamond jewellery designer, is at the center of one of India's largest banking frauds detected so far totaling over $1.77 billion. He grew his business significantly over the years but is now accused of defrauding Punjab National Bank by using fraudulent Letters of Undertaking to obtain loans from other Indian banks. The fraud was allegedly carried out through a PNB branch in Mumbai over a period of several years, with transactions not being recorded in the bank's core banking system, allowing the fraud to go undetected for a long time. Investigations are ongoing into Modi's business dealings and how this large scale fraud was able to be perpetrated.
1) The document discusses various principles of lending that banks follow such as safety, liquidity, profitability, security, purpose of loan, social responsibility, and risk diversification.
2) It also describes different types of loans and advances provided by banks including cash credits, overdrafts, bill discounting, letters of credit, and term loans.
3) The evaluation of borrowers, types of securities, and RBI's role in selective credit control are also summarized.
Know Your Customer (KYC) refers to banks obtaining identifying information from customers to prevent money laundering and financing of terrorism. The key aspects of KYC include:
1) Setting up a compliance unit to monitor accounts and transactions on an ongoing basis and update customer information regularly.
2) Obtaining proper identification and information about customers' employment/business when opening accounts or making significant changes.
3) Monitoring transactions to identify any that are unusually large or inconsistent with the customer's history.
This document discusses foreign exchange risk and its management. It begins by defining foreign exchange risk as the exposure of an institution to movements in foreign exchange rates. There are three main types of foreign exchange risk: translation exposure, transaction exposure, and economic exposure. The document then discusses various techniques for managing foreign exchange risk, including matching currency cash flows, currency swaps, forward exchange rate contracts, currency options, and more. The overall purpose is to outline the key risks and approaches taken to minimize the negative impacts of currency variations on companies' financial performance.
The document discusses several core investment banking services including domestic issue management, underwriting, global capital market offers, private placements, private equity advisory, buy-backs and de-listings, and corporate restructuring and mergers and amalgamations. It focuses on domestic issue management, elaborating on the definition of an issue and issue management. It notes the eligibility criteria for investment bankers to perform issue management including having a valid SEBI registration certificate and complying with codes of conduct. The document also discusses considerations for initial public offerings (IPOs) and follow-on public offerings (FPOs) including timing, pricing, and capital structure. It provides an overview of the regulatory framework for public offers in India and outlines important stages in
Module - 1 :
The foreign exchange market, structure and organization- mechanics of currency trading
– types of transactions and settlement dates – exchange rate quotations and arbitrage – arbitrage with and without transaction costs – swaps and deposit markets – option forwards – forward swaps and swap positions – Interest rate parity theory.
This document provides an overview of commodities trading in India, including the structure of the commodities market and major exchanges. It discusses opportunities for speculation, hedging, arbitrage, and diversification through commodities trading. Traders can implement strategies like going long, going short, calendar spreads, and taking advantage of correlations between commodities and other asset classes. Research on international and agricultural commodities is offered to help traders capitalize on market trends and opportunities.
This document provides an overview of several international financial markets including: the foreign exchange market, Eurocurrency market, Eurocredit market, Eurobond market, and international stock markets. It describes the motives and reasons for corporations and investors to use these international markets such as taking advantage of interest rate differences, currency fluctuations, and diversification benefits. The key international financial markets facilitate international trade, investment and borrowing activities.
The document discusses gold as an investment in India. It states that gold is the most favored investment instrument in India as it provides steady returns, liquidity, and satisfaction to buyers. It also diversifies investment portfolios. The document then discusses various ways to invest in gold, including physical gold and paper gold like gold ETFs, funds, and e-gold. It provides details on the features and performance of these paper gold instruments. The document concludes by discussing historical gold import data in India and factors that could influence future gold prices.
The document provides an overview of the commodity market in India, including:
1) It discusses what commodities are, traces of commodity trading in Indian history, and the significance of the commodity market in India, which involves over 50% of GDP.
2) It describes how commodity trading is controlled by national and regional exchanges regulated by the Forward Markets Commission (FMC), with the top 3 national exchanges holding over 90% of the market share.
3) It briefly outlines how commodity trading is done through various instruments on the exchanges and provides some tips for making money in the commodity market by investing in funds.
Why gold should be considered in an efficient portfolio to maximize the returns and minimize the risk? This ppt is able to answer this question to a great extent.
Harshad Mehta was an Indian stockbroker born in 1953 who triggered a securities scam in 1992 by diverting Rs. 4,000 crore from banks to inflate stock prices. He took advantage of loopholes in the banking system to siphoned money and bought shares, artificially raising prices. His actions were later exposed, causing the stock market to crash and devastating many investors. Mehta was charged with 72 criminal offenses and banned from trading, and his actions highlighted issues with regulation and oversight in the financial system.
Determinants of exchange rates - International Business - Manu Melwin Joymanumelwin
International parity conditions: Relative purchasing power parity, interest rate parity, Domestic Fisher effect, International Fisher effect. Though to some extent the above theories provide logical explanation for the fluctuations in exchange rates, yet these theories falter as they are based on challengeable assumptions [e.g., free flow of goods, services and capital] which seldom hold true in the real world.
This document provides an analysis of JPMorgan Chase & Co., including an overview of its business segments and the risks it faces. JPMorgan Chase has four main business segments: consumer and community banking, corporate and investment banking, commercial banking, and asset management. It faces various risks like credit, market, operational, and reputational risk. The document also discusses how JPMorgan Chase measures and protects itself against these risks, as well as the various regulators that oversee the company.
Introductory presentation on commodity tradingPradeep Sahoo
An introduction to Commodities Markets, Futures and other derivatives. Comparison of commodities with other asset classes and why commodity trading is indispensable for any country.
Demonetization is the discontinuation of a currency unit in circulation and replacing it with a new one. India demonetized 86% of its currency on November 8th, 2016 by removing Rs. 500 and Rs. 1000 notes from circulation. The major reasons for India's demonetization were to tackle issues like shadow economy, counterfeit currency, and terror financing. Some rationales included boosting bank deposits and savings, improving monetary transmission to reduce lending rates, and supporting government finances through increased tax collections. However, demonetization also caused short-term inconvenience and cash shortages that impacted businesses and daily wage earners.
The document discusses various aspects of foreign exchange including:
- The forex market trades over $4 trillion daily, more than the entire US GDP annually.
- Foreign exchange refers to trading one country's currency for another at exchange rates.
- In India, forex trading by individuals is considered illegal and punishable by imprisonment.
Indian markets have recently opened commodity derivatives, allowing retail investors to participate in commodity trading. Commodities such as copper, corn, and crude oil are traded on regulated exchanges like NCDEX, MCX, and NMCE. There are two main markets - the spot market where physical commodities are bought and sold for cash, and the futures market where contracts are made to buy/sell commodities at a future date and price. Exchanges have circuit filters of up to 6% to prevent large price fluctuations. Commodity derivatives provide exposure through futures, exchange traded funds, stocks of commodity companies, and mutual funds.
This document provides an overview of the Foreign Exchange Management Act (FEMA) of 1999 in India. It defines capital account transactions as those that alter assets or liabilities outside of India, and current account transactions as other payments like those related to trade, services, interest, travel expenses. FEMA restricts unauthorized dealing in foreign exchange. Exports must be declared with accurate value information. There are penalties for violations, and an appeal structure is outlined. The key differences between the old FERA and new FEMA are that FEMA aims to promote foreign trade and reserves with a more flexible approach, using residency rules of over 182 days rather than citizenship alone.
Warehouse Receipt and Collateral Managementdearasthana
Warehousing and collateral management play an important role in Indian agriculture by allowing for the storage of seasonal produce until consumption periods. The development of negotiable warehouse receipts and their dematerialization has improved post-harvest handling by facilitating credit access and linkages between spot and futures commodity markets. Extension professionals can educate farmers on utilizing warehouses, negotiable receipts, pledge financing, and commodity futures to avoid distress selling and better market their agricultural output.
Trade finance companies can be carefully fit to individual business necessities bringing about upgraded money related administration and enhanced income.
Trade commodity finance and its servicesRusca Dimitri
All types of trading market have its own particular unique examples and peculiarities that will convey its expectations. Examples don't generally work each time obviously, yet even that can be a piece of information of fundamental great shortcoming or quality.
The increased volatility of commodity markets and the rapidly evolving corporate governance and financial reporting environments place additional demands on risk management and financial reporting. Integrating the two into a single view of risks and results is the challenge facing commodity companies and their stakeholders.
In re-issuing this guide, our ambition is to support the need for a better understanding of how trading commodities works; to unveil some of the activities, often misunderstood, but used by traders to manage risk and to explain how the financial results of these activities are put together and reported.
This publication provides you with insights in topics such as:
• How the commodity trading industry is evolving
• The basics of commodity markets
• The elements of risk management
• Aspects of the financial statements that are unique for commodity trading companies
• How to recognize and measure transactions and commodity inventory positions
• How to apply fair value accounting for external reporting
• The specific requirements for derecognition of assets
The Brief and informative presentation about Pakistan Economic Issue and its solution
so The audience can easily understood to this presentation and can easily take the point of view of pakistan economy and the problems and their solutions
and also the Eras are included from sense the Independence of pakistan
Optimize commodity pricing and manage commodity riskcathylums
Learn how commodity management solutions provide an integrated offering that supports collaborative planning and management. Volatile prices, growing regulatory requirements, and the increasing executive oversight demands of commodity management need solutions that integrate with other business applications.
Specialist in Commodities
MERIT provides tailor-made commodity management services including analysis and monitoring of commodity exposure to effectively control risk, defining hedging strategies to balance budgets, and realizing trading strategies to stabilize company earnings. Founded in 1988 in Vienna, MERIT has over 20 years of experience working with industrial companies in Germany and Austria. MERIT's services are developed in-house and include consultancy, exposure management, trading, and inventory financing to help clients strengthen earnings and competitiveness through managing commodity price risks.
The Evolution of Smart Commodity ManagementCTRM Center
Over the last twenty or more years, global wholesale commodity markets have grown and evolved substantially and in the process, a sizeable new software category has been established. That software category is widely known as Commodity Management (CM) software and, at the highest level, it can be defined as those software applications, architectures and tools that support the business processes associated with managing commodities. CM software therefore comprises a broad set of functions that can vary considerably depending on which commodities are traded, what assets are employed in the business, where those assets are located, and what the nature of the company’s business strategy and associated business processes. CM software continues to evolve quite rapidly in lockstep with the industry. In past years, CM focused squarely on trading and risk management as CTRM software, but in recent years it has been extended into the supply chain with solutions such as shipping and stockyard bulk handling, for example.
As the software category has evolved, so has the volume and nature of the data that the software captures, manipulates and stores. Today, big data is an increasingly important aspect of the commodity management world as vast quantities of many types of structured and unstructured data potentially hold the key to profitability and even survival of companies that sell or purchase commodities and raw materials. As a result, the requirements that users place on CM software are also changing from essentially an after the trade recording and reporting system, to one that provides real intelligence and value back to the business.
- Wheat is one of the most internationally traded grains and has a higher protein and calorie content than other cereals. It is mainly consumed in baked goods like bread after being milled.
- The average production cost of wheat per acre in India is approximately Rs. 8,000, while the average yield is 10 quintals per acre, bringing the total income to Rs. 1,20,000.
- International wheat grain trading is a high-volume, low-margin business influenced by government policies. Margins typically range from Rs. 100-500 per metric ton depending on logistics costs.
Hedging Commodity Procurement in a Bilateral Supply ChainThe Boeing Center
This article examines hedging of commodity procurement in a bilateral supply chain where both the upstream supplier and downstream buyer face stochastic input costs. The firms' operations are interdependent as the buyer relies on the supplier for delivery and the supplier relies on the buyer for purchase. If costs that reverberate through the supply chain are left unmanaged, it can lead to significant losses or even supply disruption. The authors identify conditions where hedging commodity costs is optimal in equilibrium to ensure supply continuity, such as when the buyer has high market power or the supplier operates on large margins. Both firms must hedge and supply disruption must be costly for hedging to be sustained in equilibrium.
India is the largest producer of castor seed in the world, meeting 90% of global demand for castor oil. Gujarat contributes 75% of India's production and exports of castor oil and derivatives, with India exporting approximately $850 million worth annually. The author estimates that carryover stocks of castor seed in India will be around 6 lakh metric tons, with new crop production at 14 lakh metric tons, while exports of castor oil and derivatives in 2015 will total around 4.25 lakh and 1.25 lakh metric tons respectively.
Presentation by Lamon Rutten : "Value chain finance and risk management" presented at the Regional forum on cassava in Central Africa, from 6 to 9 December, 2016, in Yaoundé, Cameroon. More information: http://www.cta.int/en/news/regional-forum-on-cassava-in-central-africa.html
Basics of Stock Market Finance and General Operation of Commodity Market.Asit Dholakia
Presentation made on the Basic workings of Commodity Market and Stock Exchange Market.Covered the basic terminologies and some core aspects of Stock market as well as Commodity Market.
The document discusses commodity risk management and hedging strategies. It provides examples of hedging cotton and copper prices using commodity futures contracts on exchanges. Various hedging techniques are defined, including long hedges, short hedges, cross hedges, and spread hedges. Factors that influence commodity prices like production, consumption, storage costs are also summarized.
Commodity risk management and hedging framework of industrial portfoliosEnel S.p.A.
This document discusses Enel's commodity risk management and hedging framework for its industrial portfolios. It provides an overview of Enel as an integrated energy company with a major presence across Europe, South America, and other regions. It then outlines Enel's approach to distinguishing between industrial and trading portfolios when defining risk management strategies. The framework involves analyzing commodity exposures, identifying key risk drivers, performing risk analyses to support hedging strategy definition, and integrating hedging deals with Enel's trading operations. The goal is to optimize investments and manage risks across Enel's large integrated asset portfolio.
Financial markets and institutions in PakistanRahat Jaan
The document discusses financial markets and institutions in Pakistan. It defines a financial market as a place for buying and selling financial securities. The financial market in Pakistan consists of the money market, which provides short-term debts, and the capital market, which provides long-term debts to businesses. It also describes various types of financial institutions in Pakistan, including commercial banks, investment banks, development banks, microfinance banks, Islamic banks, discount houses, insurance companies, stock exchanges, leasing companies, mutual funds, and modarba.
The document discusses collateral management in the context of recent regulatory changes affecting the derivatives market. It covers topics such as the G20 requirements for derivatives trading, the impact of regulations like Basel III, and the increasing demand for collateral. Challenges related to collateral include the costs associated with managing it and the need to optimize usage of different types of collateral.
This document discusses warehouse receipt financing as a means of financing agricultural value chains in East Africa, its challenges, and ways to improve it. It outlines the concept of establishing an organized grain trading market with transparent roles. Warehousing provides post-harvest liquidity for farmers, but faces challenges like lack of market confidence in warehouses and receipts. Improving collateral management services can help overcome issues and enable more agricultural financing by banks. The benefits of effective warehousing and collateral management include convenient financing for borrowers and more lending opportunities for banks with secure collateral.
Value chain finance is an emerging approach that is well-suited to meet the current needs of agriculture. It links farmers more directly to buyers and markets through the value chain, mitigating risks for financiers. There are various forms, including warehouse receipt finance, processor-centered finance, and trader financing. For value chain finance to succeed, supportive policies and capacity building are needed from governments, central banks, and development partners. Risk management tools and learning from historical models can help overcome challenges and make value chain finance a viable solution.
Venture capital provides long-term funding for growing companies in exchange for equity. Venture capitalists seek high-growth companies led by experienced management teams. To attract venture capital, a business plan must demonstrate a large market opportunity, competitive advantage, strong financial projections, and validation. Raising venture capital is a selective process that can take several months and requires understanding the investors' evaluation criteria.
Provident Group Firm Overview May 2009 (Case Studies)markjbishop
Provident Group is a boutique investment banking and advisory firm founded in 1998 that focuses on privately placed and cross-border transactions in the middle market. It differentiates itself by structuring and placing customized financing solutions for middle market clients
The World Bank/IFC provides several trade and investment tools to promote private sector engagement in developing markets, including:
1) The Global Trade Finance Program (GTFP) provides guarantees to covering banks for payment risk on trade transactions in emerging markets, helping to provide risk coverage for imports/exports of goods like computers, cotton, and food products.
2) IFC also offers a range of debt, equity, and structured finance products to support private sector projects and expansions in areas like retail operations, payment platforms, and petroleum distribution networks.
3) These tools have supported over $500 million in exports from the US to countries in sectors like infrastructure, agriculture, and manufacturing.
This document introduces various trade finance instruments and export credit options. It discusses pre-shipping finance that exporters require to produce goods for export before receiving payment. It also explains importers' need for post-shipping finance to purchase overseas goods and sell domestically before paying. The document outlines common trade finance instruments like documentary credits, countertrade, factoring, and pre-shipping and post-shipping finance. It also discusses export credit insurance and guarantees that can protect traders from commercial and political risks in international trade transactions.
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Implicitly or explicitly all competing businesses employ a strategy to select a mix
of marketing resources. Formulating such competitive strategies fundamentally
involves recognizing relationships between elements of the marketing mix (e.g.,
price and product quality), as well as assessing competitive and market conditions
(i.e., industry structure in the language of economics).
2. I. Commodity finance
• Introduction
• Traditional finance vs Structured finance
• Examples
3. Introduction: access to finance in
commodity trade and development
• Importance of the commodity sector for developing economies and
financial constraints:
- Over 2 billion people are estimated to derive their livelihood from
production and trade of commodities;
- More than 50 developing countries and LDCs depend on three or less
leading commodities for at least half of their export earnings.
• Commodity trade and production is credit-intensive.
• Risks in commodity finance.
4. • Traditional finance (balance sheet based) vs
Structured finance (transaction based)
Economics, and political events that have global implications, especially in
emerging markets, have compelled financiers to develop and adopt innovative,
structured financing techniques to mitigate their risks and adapt to globalization
and privatization of commodity trading activities.
- Until the onset of the Latin American financial crisis in the mid-80s, banks involved
international commodity finance relied on balance sheet lending and government
guarantee.
Structured finance, on the other hand, is based on the transaction for which the
finance is provided.
- Such techniques aim to transfer risks in financing transaction from parties less
able to support those risks to those more equipped to support them in a manner
that ensures automatic reimbursement of advances from the underlying assets
such as inventory and export receivables... This forms the pillar of structured trade
finance.
5. Through use of structuring techniques,
financiers can control their level of risk
Without structured With secured With structured
finance: finance: finance:
financier financier financier
Will the How to Will the
borrower $ control borrower $
reimburse? collateral? produce?
Potential Potential Potential
Goods Offtake
borrower borrower borrower
r
6. Practical use of structured trade finance:
There are no distinct standardized types of structure trade finance
transactions since one essential principle of these transaction is the
ability to tailor a structure that will satisfy the needs and
circumstances of all parties involved, provided that perceived or real
risks are mitigated. We are going to present some basic forms of
structured finance, their concept, and transactions flow.
1. Export receivables-backed financing
2. Supply Chain finance
3. Warehouse receipts finance
7. Success Factors Along The Value Chain
Transport
Transport
Manufacture/
Storage
Storage
Agri Agricultural Agricultural Commodity Further Wholesale/
Value Chain Inputs Production Sales Processing/ Distribution
Packaging
Financing Production /
Trade / Export Wholesale
Stages Processing
• Local producers & processors;
• Local producers & processors •Small commodity traders • Local distributors
Agri • Commercial farmers;
•
•Commercial farmers •Large commodity traders • F & B ultinationals
m
Players • International input suppliers. suppliers
•
International input • Wholesalers.
Producers Commodity Buyers
Processors Traders
• Input financing; • Working capital;
•
Working capital/liquidity; • Trade finance;
• Working capital/basic cash • • Price risk management;
Structured trade finance
Financing • Crop risk management and collateral management, • Structured finance:
Needs weather insurance • etc.;
Price risk management; receivables-back finance, pre-
• Structured finance: payment etc.
• Foreign exchange. • Foreign exchange.
WRS/inventory based finance,
etc..
Pre-shipment finance Post-shipment finance
8. Export receivables-backed financing
This model entails the provision of pre-export loans or advance
payment facilities to an exporter, with repayment being obtained
from the exporter’s receivables resulting from the sale of the pre-
financed exported commodities.
Under this model, banks take the following combined measures:
(a) Taking security over the physical commodities in the form of a
local-law pledge or similar security interest;
(b) Assigning the receivables generated under the commodity
export contracts;
(c) Establishing an escrow account in a suitable (usually offshore)
location into which buyers of the commodity are directed to pay the
assigned export receivables.
9. EXAMPLE: Receivable-Based
Financing
1. Underlying transaction: To trade naphtha
and crude oil.
2. Lender: XYZ Bank.
Shipment Buyers (Oil
3. Facility Amount: US$ 50 million for credit Exporter
Refineries)
facility.
Letter of
4. Exporter: Oil company Acknowledgment
Letter of Undertaking
5.. Importers: oil refineries worldwide. (remedial procedures in
Payment at case of non-performance) Payment after
7. Tenor: 30-90 days from B/L date. shipment 30-90 days from
B/L date through
8. Collateral: Outstanding account an escrow
receivables. account
XYZ Bank
Assignment of
9. Facility Period: 1 year. contract/A/R etc..
10. Each transaction amount: Over US$5
million.
This financing is given to the exporter once goods are shipped and repayment is done
automatically by importer through an escrow account.
This creates an automatic reimbursement procedure.
This enables exporters to use future trade flows to raise self-liquidating export-based financing
at better cost and tenor. It also enables financiers to externalize country and credit risks by the
assignment of export contracts and receivables, and by receiving payment in an offshore escrow
10. Example - revolving pre-export finance for fishermen and a fish
processing plant
Foreign
Local Monitoring bank
bank Loan used
for buying oil
Diesel oil
Reimbursement
Diesel
Processor/
Fisher
Fish freezing Fish Foreign
men
plant buyers
Fish
Local
market
11. A simple warehouse receipt finance scheme - open to various depositors. This
can act as a model to reach farmers - who are often willing to pay high interest rates.
4. Provide credit
3.Lodges receipts with bank
Farmer Banks
1. Deposits
products
5.Signs sales
Guarantee, insurance,
contract
2.Issues Warehouse etc.
receipts Guarantee
9. Delivers
agencies
receipt; Approves
warehouse Warehouse Government
makes delivery
Trader regulator
6. Reimburses credit; in return, bank transfers receipts
12. An example of using a collateral manager to finance
South-South trade
Acceptable payment will
allow rice to be released
Bank
from import warehouse
Payment when goods enter
into warehouse controlled by
the collateral manager
Rice Rice
Warehouse Warehouse
exporter Importer
Collateral manager takes full control from moment on that
goods enter export warehouse, until release (as authorized by
the bank) from the import warehouse. The bank will have
recourse to him for most losses during this period.
Collateral management Collateral
agreement manager
13. Commodities will increasingly
become a financial asset – any
commodity will be like a Commo-
Money
currency. dities
Financial markets will develop
around these new “currencies”.
Independent entities will be
doing the leg work to convert
commodities, as they move
through the value change, into
financial assets. “Paper”
Technology will link it all
together – through a Global
Commodity Receipt system.
14. WRS in Tanzania
- The CFC funded Coffee and Cotton marketing development project which
was launched in 1999.
- Tanzania has passed a Warehouse Receipts Act (2005) and Warehouse
Regulations (2006),
- and has designated a Licensing Board in the Ministry of Industry, Trade and
Marketing
-This has registered some 20 warehouses (12 for cashew, 5 for coffee, 2 for
cotton and 2 for paddy rice), and plans to establish a fully-fledged licensing
regime.
15. WRS in Tanzania
Commodities Finance includes:
- Traditional crops (coffee, cotton) has expanded their loans portfolio at
ground level.
The WRS has taken off with coffee since the latter 90s and 25% - 30% of the country’s exports
are reported to pass through the system, much of it supplied by POs (farmer business groups,
primary cooperative societies etc.) that bulk on behalf of their members.
- Non traditional crops such as Paddy (MF-linked approach, with upward of
10,000 tonnes being stored by farmers per year), Maize and sunflowers are
recognized and getting finance from the bank.
- Cashew nut WRS initiative emerged in 2007. More than 168 primary
cooperative societies in cashew nuts sub sectors are financed in in the
business of raw cashew nuts. Total loan portfolio in cashew nuts WRS finance
exceed U$50 million.
16. II. Price risk management
• Describing briefly organised and over-the-
counter markets
• Hedging tools
17. Hedging
Market used for risk management is divided in two part
Market used for risk management is divided in two part
Commodity Over-the-counter
exchange market
Although the basic ways to use these tools can easily be learned, hedging strategies can
become quite complex.
{
The need to pay margin deposits/guarantees
Even with a good mastery of Margin calls, which could be required, and which
these instruments, some can be high
difficulties exist, due to:
The fact that in some countries, intermediaries do not
really exist, or even use of these markets is banned
18. Tools for Commodity Risk Management
• Specification of price or minimum price in contracts
for sale of commodities by farmers or processors at
future date
• Forward and futures contracts
– Forward contracts negotiated on individual basis
– Futures contracts specified on commodity exchanges
– Options is right and not obligation to purchase or sell a
commodity at a a ”strike” price on or before a specified
date – pay a premium at time contract signed
19. Concept of price risk management
Financial markets provide possibilities to hedge against price risks. These
hedging instruments are:
Futures
Options (put, call)
Swaps
20. Futures
Futures are kind of standardised contracts for future delivery of an asset (that could be
commodity). There are:
Helpful to Useful for some An ideal
hedge price risk marketing benchmark
exposure strategies price
Lock-in a future price Initial position can easily be reversed Give a good benchmark
price to barter
Protect the value of inventories Delivery is not necessarily implied
or finance storage
No need to negotiate contract
specifications
These kinds of contracts are regulated by exchange’s authorities, and there execution are guarantee by
clearing houses.
21. Differences between Forward and Futures Contracts
Forward Contracts Futures Contracts
Most are traded OTC Are traded on organized exchanges
through clearing houses
Can be tailor-made to match specific Have standardized contract terms
hedging needs
Require cash transfer only at maturity of Require initial transfer for margin
contract payments and may require daily
settlements to adjust margins to adverse
price movements
Involve a high degree of counterparty risk Imply very little counterparty risk because
because no clearing house facility exists the clearing house guarantees the
fulfillment of contractual obligations
Contain the expectation of physical Only a small fraction of futures contracts
delivery result in actual delivery of the underlying
commodity
22. Options
Options contracts give the right (but not the obligation), to purchase or sell a specific asset at a
predetermined price on or before a specified date. There are two kinds of options contracts:
Call option Put option
US call: the right to buy at any time US put: the right to sell at any time
during the period. during the period.
European call: the right to buy, but only European put: the right to sell, but only
at the end of the period. at the end of the period.
Main use are for:
Obtaining short- Part of Protection against
term finance marketing unfavourable price
strategy movements
An over-the-counter In regard of longer-term Limits the size of the maximum loss but
financing trade relationships do not eliminate the opportunity to take
advantage of favourable price movements
23. Swaps
A swap is a purely financial instrument under which specified cash-flows are exchanged
at specified intervals.
Obtain easier Lock in long-
Guarantee and cheaper term prices
income streams access to capital
From financial operations or No or less-strict margin calls Long term instrument
new investments
Low administrative costs once Combination of price
structured hedging and investment
securization
Tailor-made
It should be noticed that swaps are purely financial tools, which means that no delivery of physical
are requested.
24. Coffee Cooperative in Tanzania
• Multiple payments to farmers throughout the year
– Minimum price when deliver coffee
– Supplementary payments based on price at which coffee
sold on world market
• Risk to cooperative of setting initial price
– Too low, farmers sell elsewhere
– Too high, lose money
• Mitigated through hedging in futures market
26. Commodity exchanges
Commodity exchanges are financial organised market Main Commodity Exchange around the world:
where commodities are traded on standard contract. Main Commodity Exchange around the world:
There exist a several commodity exchanges around Chicago Board of Trade (CBOT)
Chicago Board of Trade (CBOT)
the world, each place trading a certain part of New York Mercantile Exchange (NYMEX)
New York Mercantile Exchange (NYMEX)
commodities. Coffee Sugar and Cocoa Exchange (CSCE)
Coffee Sugar and Cocoa Exchange (CSCE)
New York Commodity Exchange (NYCE)
New York Commodity Exchange (NYCE)
Commodity exchanges provide London Metal Exchange (LME)
London Metal Exchange (LME)
International Petroleum Exchange (IPE)
International Petroleum Exchange (IPE)
Standardised contracts London Commodity Exchange (LCE) MATIF
London Commodity Exchange (LCE) MATIF
(Paris)
(Paris)
Strict controlled financial streams
Efficient market (due to the As shown, main commodity exchanges are located in USA
normally great volume of trade, and UK. There are the most efficient and can therefore
clear information, control...) provide good international benchmark prices for the
commodity they trade.
Good international benchmark
prices for the traded commodities
Secured trade
27. Over the counter market
The need for more sophisticated and specific hedging instrument has lead the over-the-
counter market to be more and more used. This is mainly due to the fact that this kind of
market provide:
direct interaction between client and intermediary (bank,
trade house, brokerage firm…)
contract uncontrolled by a clearing house
tailor made contract
long term hedging instruments
Nevertheless, it should be paid attention to the following fact:
this market is not transparent
once entered into a transaction, it is very difficult to reverse
margin are not about to decrease, since contracts are not
standardised (i.e. intermediaries try to keep contract highly
tailor made then not competitive).