This document provides an introduction to commodity markets. It defines a commodity as a good or produce that can be bought and sold, and has value. A commodity market is a physical or virtual place for trading raw products. Problems with physical commodity markets include a lack of price dissemination, fragmented markets, and high volatility in spot prices. Commodity markets include spot markets, where physical delivery occurs immediately, and derivatives markets, where futures and options contracts allow buying or selling at a future date. Futures contracts are standardized agreements to buy or sell a commodity at a predetermined price on a future date. Options provide additional flexibility by giving the buyer the right, but not obligation, to buy or sell the underlying asset. Key participants in derivatives
1. The document discusses various types of derivatives including equity derivatives, forwards, futures, options, swaps, and warrants.
2. It explains the key features and differences between these derivatives, such as how forwards are customized contracts while futures are exchange-traded standardized contracts.
3. The roles of various participants in the derivatives markets are discussed, including hedgers who use derivatives to mitigate risk, speculators who take on risk to profit from price movements, and arbitrageurs who seek to profit from temporary price discrepancies.
This document provides an overview of derivatives, including what they are, the different types (forwards/futures, options, swaps), how they are traded (exchange-traded vs over-the-counter), and their significance in Pakistan. It defines derivatives as financial instruments whose value is based on an underlying variable, and discusses how they can be used to hedge risk. The main types of derivatives contracts - forwards/futures, options, and swaps - are explained. It also outlines recommendations to promote Pakistan's nascent derivatives markets, such as addressing concerns of market participants and improving financial literacy.
The document discusses commodities markets and futures/forwards contracts. There are two main categories of commodities - hard commodities like gold and oil that must be mined/extracted, and soft commodities like agricultural products. Most commodity trading involves futures contracts, which are exchange-traded forward contracts. A futures contract establishes the price today for buying/selling an asset in the future. While delivery occurs if a contract expires, most parties offset their positions before expiration to avoid delivery.
The document discusses commodities markets and futures/forwards contracts. There are two main categories of commodities - hard commodities like gold and oil that must be mined/extracted, and soft commodities like agricultural products. Most commodity trading involves futures contracts, which are exchange-traded forward contracts. A futures contract establishes the price today for buying or selling an asset in the future. While delivery occurs if a contract is held to expiration, most parties offset their positions before expiration to avoid delivery.
Commodities markets facilitate the trading of raw materials like oil, gold, and agricultural products. Commodities can be traded via futures contracts, which are agreements to buy or sell the commodity at a future date for a price determined today. There are two main types of commodities - hard commodities like metals that must be mined and soft commodities like agricultural products. Most commodity trading involves futures contracts, though physical trading and derivatives are also used. Exchanges worldwide facilitate trading in over 100 commodities.
Commodity derivatives markets allow farmers, producers, and other entities to hedge against risks from price fluctuations in commodities. Derivative contracts date back to ancient times but organized exchanges began emerging in the 18th century in locations like Osaka, London, and Chicago. Common derivative products include forwards, futures, swaps, and options. Forwards and futures are agreements to buy or sell an asset at a future date, while swaps and options provide rights to exchange or buy/sell assets without obligations. Derivatives markets benefit participants by allowing risk transfer between hedgers and speculators/arbitrageurs and facilitating price discovery. However, derivatives also introduce risks like counterparty default, basis risk, and complexity that
The document provides an overview of risk management with futures contracts, explaining key concepts like hedging, short and long positions, forwards versus futures, margins, mark-to-market process, and how taking opposite positions in the cash and futures markets can help reduce risk for buyers and sellers. Futures contracts standardize terms to allow for trading on exchanges, use a clearing house to minimize counterparty risk, require daily margin payments to settle profits and losses, and can be closed out before expiration.
Derivatives are financial instruments that derive their value from an underlying asset such as a security, commodity, currency, or index. There are several types of derivatives including forwards, futures, options, and swaps. Forwards and futures involve an obligation to buy or sell the underlying asset on a specified future date at an agreed upon price. Options provide the right but not the obligation to buy or sell the underlying asset at a predetermined price on or before a specified date. Swaps involve exchanging cash flows with another party based on a prearranged formula applied to an underlying asset or assets.
1. The document discusses various types of derivatives including equity derivatives, forwards, futures, options, swaps, and warrants.
2. It explains the key features and differences between these derivatives, such as how forwards are customized contracts while futures are exchange-traded standardized contracts.
3. The roles of various participants in the derivatives markets are discussed, including hedgers who use derivatives to mitigate risk, speculators who take on risk to profit from price movements, and arbitrageurs who seek to profit from temporary price discrepancies.
This document provides an overview of derivatives, including what they are, the different types (forwards/futures, options, swaps), how they are traded (exchange-traded vs over-the-counter), and their significance in Pakistan. It defines derivatives as financial instruments whose value is based on an underlying variable, and discusses how they can be used to hedge risk. The main types of derivatives contracts - forwards/futures, options, and swaps - are explained. It also outlines recommendations to promote Pakistan's nascent derivatives markets, such as addressing concerns of market participants and improving financial literacy.
The document discusses commodities markets and futures/forwards contracts. There are two main categories of commodities - hard commodities like gold and oil that must be mined/extracted, and soft commodities like agricultural products. Most commodity trading involves futures contracts, which are exchange-traded forward contracts. A futures contract establishes the price today for buying/selling an asset in the future. While delivery occurs if a contract expires, most parties offset their positions before expiration to avoid delivery.
The document discusses commodities markets and futures/forwards contracts. There are two main categories of commodities - hard commodities like gold and oil that must be mined/extracted, and soft commodities like agricultural products. Most commodity trading involves futures contracts, which are exchange-traded forward contracts. A futures contract establishes the price today for buying or selling an asset in the future. While delivery occurs if a contract is held to expiration, most parties offset their positions before expiration to avoid delivery.
Commodities markets facilitate the trading of raw materials like oil, gold, and agricultural products. Commodities can be traded via futures contracts, which are agreements to buy or sell the commodity at a future date for a price determined today. There are two main types of commodities - hard commodities like metals that must be mined and soft commodities like agricultural products. Most commodity trading involves futures contracts, though physical trading and derivatives are also used. Exchanges worldwide facilitate trading in over 100 commodities.
Commodity derivatives markets allow farmers, producers, and other entities to hedge against risks from price fluctuations in commodities. Derivative contracts date back to ancient times but organized exchanges began emerging in the 18th century in locations like Osaka, London, and Chicago. Common derivative products include forwards, futures, swaps, and options. Forwards and futures are agreements to buy or sell an asset at a future date, while swaps and options provide rights to exchange or buy/sell assets without obligations. Derivatives markets benefit participants by allowing risk transfer between hedgers and speculators/arbitrageurs and facilitating price discovery. However, derivatives also introduce risks like counterparty default, basis risk, and complexity that
The document provides an overview of risk management with futures contracts, explaining key concepts like hedging, short and long positions, forwards versus futures, margins, mark-to-market process, and how taking opposite positions in the cash and futures markets can help reduce risk for buyers and sellers. Futures contracts standardize terms to allow for trading on exchanges, use a clearing house to minimize counterparty risk, require daily margin payments to settle profits and losses, and can be closed out before expiration.
Derivatives are financial instruments that derive their value from an underlying asset such as a security, commodity, currency, or index. There are several types of derivatives including forwards, futures, options, and swaps. Forwards and futures involve an obligation to buy or sell the underlying asset on a specified future date at an agreed upon price. Options provide the right but not the obligation to buy or sell the underlying asset at a predetermined price on or before a specified date. Swaps involve exchanging cash flows with another party based on a prearranged formula applied to an underlying asset or assets.
The document discusses various financial instruments in India including the capital market, money market, stock exchanges, commodity exchanges, derivatives such as futures, forwards and options. It provides details on the key features and differences between these instruments such as forwards being a private agreement while futures are exchange-traded and standardized. It also discusses concepts like margin requirements, order types and players in the financial markets like hedgers, speculators and arbitrageurs.
A derivative is a financial instrument whose value is derived from the value of an underlying asset. Derivatives include forwards, futures, options, and swaps. Forwards and swaps are traded over-the-counter (OTC), while futures and options are traded on exchanges. Options give the holder the right but not obligation to buy or sell the underlying asset. Swaps involve exchanging cash flows of one asset for another at periodic intervals. Derivatives allow investors to hedge risk or speculate on price movements of the underlying asset.
A derivative is a financial instrument whose value is derived from the value of an underlying asset. Derivatives include forwards, futures, options, and swaps. Forwards and futures are contracts to buy or sell an asset at a future date, while options provide the right but not obligation to buy or sell. Swaps involve exchanging cash flows of one asset for another. Derivatives can be traded over-the-counter or on an exchange, with exchange-traded derivatives using standardized contracts.
- A forwards contract is a customized agreement between two parties to buy or sell an asset at a predetermined price at a specified future date. Forwards contracts involve delivery of the asset.
- Futures contracts are standardized exchange-traded contracts to buy or sell an asset with delivery or cash settlement at expiration. They are marked to market daily and involve margin requirements. Positions can be offset by entering an equal but opposite transaction rather than settling via delivery.
This ppt is prepared to provide detailed information regarding Forwards and Futures contracts of Derivatives the topics covered under this are Meaning of Forwards contracts, Underlying Assets of Forwards contracts, FEATURES OF FORWARD CONTRACTS, Tailored made, Why Forwards contracts, FUTURES CONTRACT, What is A Futures Contract, Characteristics of Futures contracts, Mechanism of Trading in Futures Market, Margin requirement, Marking-to-market (M2M), SETTLING A FUTURE POSITION, OFFSETTING, CASH DELIVERY, by Sundar, Assistant Professor of commerce.
Subscribe to Vision Academy for Video assistance
https://www.youtube.com/channel/UCjzpit_cXjdnzER_165mIiw
Agriculture Marketing (Mkt165) chapter 7-mktg of agricultural commoditieswatak manga pilu
The document discusses commodity exchanges and futures markets. It provides definitions for key terms like physical markets, futures markets, commodity exchanges, spot prices, futures prices, bull and bear markets. It describes the functions of the Kuala Lumpur Commodities Exchange in Malaysia and how it facilitates trading of commodities like crude palm oil, tin, and rubber. It also outlines different types of traders in futures markets like speculators and hedgers, and how hedging can help manage price risk for agricultural commodities.
1. The document discusses various derivatives trading concepts such as futures contracts, forward contracts, and options. It explains that futures contracts are standardized agreements to buy or sell an asset at a specified price on a future date, while forward contracts are customized agreements with physical delivery of the asset.
2. Options are described as contracts that give the buyer the right but not the obligation to buy or sell an asset at a specified price on or before the expiration date. The main types are calls, which are rights to buy, and puts, which are rights to sell.
3. Participants in futures markets are identified as hedgers who protect their positions, speculators who take risks seeking profits, and arbitrageurs who exploit
Derivatives derive their value from underlying assets. There are various types including forwards, futures, options, and swaps. Forward contracts are bilateral agreements to buy or sell an asset in the future at predetermined terms. Futures are standardized forward contracts that are traded on an exchange. Options provide the right but not obligation to buy or sell an asset by a specified date. Swaps involve exchanging cash flows of underlying assets like interest rates or currencies. Derivatives allow participants to hedge or speculate on price movements of the underlying assets.
This document provides an overview of derivatives, including the key participants in the derivatives market, types of derivative contracts, and some examples. It discusses forwards, futures, options, and swaps. Forwards and futures are distinguished, with examples provided. Call and put options are explained using examples. Interest rate swaps and currency swaps are also briefly covered. The document then discusses expiry dates, trading, and final settlement of futures and options contracts. It concludes by noting some of the main risks associated with derivatives.
This document discusses key concepts related to derivatives and risk management. It defines cash, futures, and forward markets. Cash markets involve immediate delivery, while futures are exchange-traded contracts to buy/sell an asset at a predetermined price on a predetermined date. Forwards are over-the-counter contracts between two parties with customized terms. Key differences between these markets include physical delivery requirements, margin requirements, regulation, and counterparty risk. The document also explains concepts like open interest, volume, and lifetime highs and lows.
Derivatives are financial instruments whose value is dependent on an underlying asset. The three main types of derivatives are forwards, futures, and options. Forwards and futures are contracts to buy or sell an asset at a future date at a predetermined price, while options provide the right but not obligation to buy or sell an asset at a strike price. Derivatives allow traders to hedge risk, reduce transaction costs, manage portfolios, and enhance liquidity in markets.
Derivatives are financial instruments whose value is dependent on an underlying asset. The three main types of derivatives are forwards, futures, and options. Forwards and futures are contracts to buy or sell an asset at a future date at a predetermined price, while options provide the right but not obligation to buy or sell an asset at a strike price. Derivatives allow traders to hedge risk, reduce transaction costs, manage portfolios, and enhance liquidity. Key participants in derivatives markets include hedgers who offset risk, speculators who take on risk, and arbitrageurs who exploit pricing discrepancies across markets.
The document discusses various types of financial derivatives including futures, forwards, options, and swaps. It explains that derivatives derive their value from underlying assets and are used to hedge risk or profit from price changes. Futures contracts are exchange-traded standardized agreements to buy or sell assets at a future date, while other derivatives like forwards and swaps are customized over-the-counter transactions.
DIFFERENCE BETWEEN CASH MARKET AND DERIVATIVES MARKETSudharshanE1
DIFFERENCE BETWEEN CASH MARKET AND DERIVATIVES MARKET.A cash market is a marketplace for the immediate settlement of transactions involving commodities and securities.
- A forward market allows for the future delivery of stocks, currencies, or commodities at a predetermined price, protecting buyers and sellers from price fluctuations. Forward contracts are privately negotiated over-the-counter, while futures contracts are standardized and traded on an exchange.
- The main purposes of forward and futures markets are to hedge against risks from fluctuating prices and interest rates and to allow investors to speculate. These markets provide flexibility and reduce risks for financial companies and investors.
this ppt includes commodity meaning, types of commodities, physical delivery of commodity meaning, various steps to do physical delivery delivery of commodities, difference between physical delivery of commodities and cash delivery of commodities
Financial derivatives are financial instruments linked to an underlying asset or indicator. Derivatives allow parties to trade financial risks independently from owning the underlying asset. There are several types of derivatives, including futures, forwards, options, and swaps. Futures are standardized forward contracts traded on an exchange. Options give the holder the right but not obligation to buy or sell the underlying asset. Swaps involve exchanging cash flows between two parties over time based on a notional principal amount. Derivatives are used by hedgers, speculators, and arbitrageurs to manage risk, seek profit, and exploit pricing discrepancies.
The document discusses various types of derivative contracts including forwards, futures, options, and swaps. It defines each type of contract and provides examples. Key details covered include how futures contracts are exchange-traded and standardized while forwards are over-the-counter. Options give the buyer the right but not obligation to buy or sell the underlying asset. The document also discusses terminology used in derivatives and futures markets.
The document provides an overview of derivatives presented by group "The Trio" comprising of Neelam, Fatima, and Benish. It discusses the history and development of derivatives markets dating back to medieval times. It describes the key players in derivatives markets as hedgers, speculators, and arbitrageurs. Hedgers use derivatives to reduce risk, while speculators aim to profit from price movements. Arbitrageurs exploit temporary price differences across markets. The document also covers various types of derivatives including forwards, futures, and options contracts. It provides details on how these contracts work, their risk-return characteristics, and the current status of derivatives markets in Pakistan.
This document discusses various types of cold storage equipment and material handling equipment used in warehouses. It describes racks, shelves, mezzanines, and other storage systems used for organizing inventory. It also outlines different types of storage configurations like block stacking, wide aisle racking, double-deep racking, narrow aisle racking, drive-in racking, and satellite racking. Additionally, it covers the equipment used for horizontal and vertical movement of inventory like forklifts, tow tractors, AGVs, lift tables, and conveyor belts. Specialized equipment with attachments for efficient handling of different cargo are also presented.
This document discusses various tools used to monitor cold chains, including thermometers, chart recorders, time-temperature indicators, data loggers, RFID, wireless sensors, and IoT devices. It provides details on how each tool works and its advantages and disadvantages. The document recommends integrating these tools to ensure effective cold chain monitoring, such as combining RFID and sensors to remotely track temperature and product shelf life over time.
The document discusses various financial instruments in India including the capital market, money market, stock exchanges, commodity exchanges, derivatives such as futures, forwards and options. It provides details on the key features and differences between these instruments such as forwards being a private agreement while futures are exchange-traded and standardized. It also discusses concepts like margin requirements, order types and players in the financial markets like hedgers, speculators and arbitrageurs.
A derivative is a financial instrument whose value is derived from the value of an underlying asset. Derivatives include forwards, futures, options, and swaps. Forwards and swaps are traded over-the-counter (OTC), while futures and options are traded on exchanges. Options give the holder the right but not obligation to buy or sell the underlying asset. Swaps involve exchanging cash flows of one asset for another at periodic intervals. Derivatives allow investors to hedge risk or speculate on price movements of the underlying asset.
A derivative is a financial instrument whose value is derived from the value of an underlying asset. Derivatives include forwards, futures, options, and swaps. Forwards and futures are contracts to buy or sell an asset at a future date, while options provide the right but not obligation to buy or sell. Swaps involve exchanging cash flows of one asset for another. Derivatives can be traded over-the-counter or on an exchange, with exchange-traded derivatives using standardized contracts.
- A forwards contract is a customized agreement between two parties to buy or sell an asset at a predetermined price at a specified future date. Forwards contracts involve delivery of the asset.
- Futures contracts are standardized exchange-traded contracts to buy or sell an asset with delivery or cash settlement at expiration. They are marked to market daily and involve margin requirements. Positions can be offset by entering an equal but opposite transaction rather than settling via delivery.
This ppt is prepared to provide detailed information regarding Forwards and Futures contracts of Derivatives the topics covered under this are Meaning of Forwards contracts, Underlying Assets of Forwards contracts, FEATURES OF FORWARD CONTRACTS, Tailored made, Why Forwards contracts, FUTURES CONTRACT, What is A Futures Contract, Characteristics of Futures contracts, Mechanism of Trading in Futures Market, Margin requirement, Marking-to-market (M2M), SETTLING A FUTURE POSITION, OFFSETTING, CASH DELIVERY, by Sundar, Assistant Professor of commerce.
Subscribe to Vision Academy for Video assistance
https://www.youtube.com/channel/UCjzpit_cXjdnzER_165mIiw
Agriculture Marketing (Mkt165) chapter 7-mktg of agricultural commoditieswatak manga pilu
The document discusses commodity exchanges and futures markets. It provides definitions for key terms like physical markets, futures markets, commodity exchanges, spot prices, futures prices, bull and bear markets. It describes the functions of the Kuala Lumpur Commodities Exchange in Malaysia and how it facilitates trading of commodities like crude palm oil, tin, and rubber. It also outlines different types of traders in futures markets like speculators and hedgers, and how hedging can help manage price risk for agricultural commodities.
1. The document discusses various derivatives trading concepts such as futures contracts, forward contracts, and options. It explains that futures contracts are standardized agreements to buy or sell an asset at a specified price on a future date, while forward contracts are customized agreements with physical delivery of the asset.
2. Options are described as contracts that give the buyer the right but not the obligation to buy or sell an asset at a specified price on or before the expiration date. The main types are calls, which are rights to buy, and puts, which are rights to sell.
3. Participants in futures markets are identified as hedgers who protect their positions, speculators who take risks seeking profits, and arbitrageurs who exploit
Derivatives derive their value from underlying assets. There are various types including forwards, futures, options, and swaps. Forward contracts are bilateral agreements to buy or sell an asset in the future at predetermined terms. Futures are standardized forward contracts that are traded on an exchange. Options provide the right but not obligation to buy or sell an asset by a specified date. Swaps involve exchanging cash flows of underlying assets like interest rates or currencies. Derivatives allow participants to hedge or speculate on price movements of the underlying assets.
This document provides an overview of derivatives, including the key participants in the derivatives market, types of derivative contracts, and some examples. It discusses forwards, futures, options, and swaps. Forwards and futures are distinguished, with examples provided. Call and put options are explained using examples. Interest rate swaps and currency swaps are also briefly covered. The document then discusses expiry dates, trading, and final settlement of futures and options contracts. It concludes by noting some of the main risks associated with derivatives.
This document discusses key concepts related to derivatives and risk management. It defines cash, futures, and forward markets. Cash markets involve immediate delivery, while futures are exchange-traded contracts to buy/sell an asset at a predetermined price on a predetermined date. Forwards are over-the-counter contracts between two parties with customized terms. Key differences between these markets include physical delivery requirements, margin requirements, regulation, and counterparty risk. The document also explains concepts like open interest, volume, and lifetime highs and lows.
Derivatives are financial instruments whose value is dependent on an underlying asset. The three main types of derivatives are forwards, futures, and options. Forwards and futures are contracts to buy or sell an asset at a future date at a predetermined price, while options provide the right but not obligation to buy or sell an asset at a strike price. Derivatives allow traders to hedge risk, reduce transaction costs, manage portfolios, and enhance liquidity in markets.
Derivatives are financial instruments whose value is dependent on an underlying asset. The three main types of derivatives are forwards, futures, and options. Forwards and futures are contracts to buy or sell an asset at a future date at a predetermined price, while options provide the right but not obligation to buy or sell an asset at a strike price. Derivatives allow traders to hedge risk, reduce transaction costs, manage portfolios, and enhance liquidity. Key participants in derivatives markets include hedgers who offset risk, speculators who take on risk, and arbitrageurs who exploit pricing discrepancies across markets.
The document discusses various types of financial derivatives including futures, forwards, options, and swaps. It explains that derivatives derive their value from underlying assets and are used to hedge risk or profit from price changes. Futures contracts are exchange-traded standardized agreements to buy or sell assets at a future date, while other derivatives like forwards and swaps are customized over-the-counter transactions.
DIFFERENCE BETWEEN CASH MARKET AND DERIVATIVES MARKETSudharshanE1
DIFFERENCE BETWEEN CASH MARKET AND DERIVATIVES MARKET.A cash market is a marketplace for the immediate settlement of transactions involving commodities and securities.
- A forward market allows for the future delivery of stocks, currencies, or commodities at a predetermined price, protecting buyers and sellers from price fluctuations. Forward contracts are privately negotiated over-the-counter, while futures contracts are standardized and traded on an exchange.
- The main purposes of forward and futures markets are to hedge against risks from fluctuating prices and interest rates and to allow investors to speculate. These markets provide flexibility and reduce risks for financial companies and investors.
this ppt includes commodity meaning, types of commodities, physical delivery of commodity meaning, various steps to do physical delivery delivery of commodities, difference between physical delivery of commodities and cash delivery of commodities
Financial derivatives are financial instruments linked to an underlying asset or indicator. Derivatives allow parties to trade financial risks independently from owning the underlying asset. There are several types of derivatives, including futures, forwards, options, and swaps. Futures are standardized forward contracts traded on an exchange. Options give the holder the right but not obligation to buy or sell the underlying asset. Swaps involve exchanging cash flows between two parties over time based on a notional principal amount. Derivatives are used by hedgers, speculators, and arbitrageurs to manage risk, seek profit, and exploit pricing discrepancies.
The document discusses various types of derivative contracts including forwards, futures, options, and swaps. It defines each type of contract and provides examples. Key details covered include how futures contracts are exchange-traded and standardized while forwards are over-the-counter. Options give the buyer the right but not obligation to buy or sell the underlying asset. The document also discusses terminology used in derivatives and futures markets.
The document provides an overview of derivatives presented by group "The Trio" comprising of Neelam, Fatima, and Benish. It discusses the history and development of derivatives markets dating back to medieval times. It describes the key players in derivatives markets as hedgers, speculators, and arbitrageurs. Hedgers use derivatives to reduce risk, while speculators aim to profit from price movements. Arbitrageurs exploit temporary price differences across markets. The document also covers various types of derivatives including forwards, futures, and options contracts. It provides details on how these contracts work, their risk-return characteristics, and the current status of derivatives markets in Pakistan.
This document discusses various types of cold storage equipment and material handling equipment used in warehouses. It describes racks, shelves, mezzanines, and other storage systems used for organizing inventory. It also outlines different types of storage configurations like block stacking, wide aisle racking, double-deep racking, narrow aisle racking, drive-in racking, and satellite racking. Additionally, it covers the equipment used for horizontal and vertical movement of inventory like forklifts, tow tractors, AGVs, lift tables, and conveyor belts. Specialized equipment with attachments for efficient handling of different cargo are also presented.
This document discusses various tools used to monitor cold chains, including thermometers, chart recorders, time-temperature indicators, data loggers, RFID, wireless sensors, and IoT devices. It provides details on how each tool works and its advantages and disadvantages. The document recommends integrating these tools to ensure effective cold chain monitoring, such as combining RFID and sensors to remotely track temperature and product shelf life over time.
a) The Amul model is a three-tiered cooperative structure that connects milk producers directly to consumers while removing middlemen. This allows Amul to offer affordable prices while also providing remunerative returns to farmers.
b) Amul procures milk daily from 3.6 million farmers across 18,500 village societies. The milk is tested, processed, and marketed through unions and federations before being distributed via Amul's large cold chain network.
c) Amul's digital transformation with IBM helped it gain visibility and control over its complex supply chain. This allowed Amul to efficiently divert resources during the COVID-19 lockdown, ensuring steady supply while other dairy firms struggled.
The document discusses digital supply chain (DSC) transformation. It defines DSC as using information systems and innovative technologies to strengthen integration and agility across the supply chain. DSC is needed to adapt to changing customer behavior and demand patterns while remaining competitive. Emerging technologies that enable DSC include big data analysis, the internet of things, robotics, 3D printing, cloud computing and social media. The document then discusses Amul's strategic partnership with IBM that transformed its supply chain through a private cloud and digital systems. This digital transformation helped Amul gain transparency, flexibility and a 10x growth in business. It allowed Amul to quickly adapt and ensure steady supply during the COVID-19 lockdown.
Agricultural management practices (e.g., tillage and reconsolidation; no-tillage and surface residues; plants and crop rotations; irrigation, manure, and fertilization practices; and grazing management) are major sources of temporal variability of soil properties and processes.
Cross docking is a logistics practice where incoming shipments are unloaded and loaded directly into outbound vehicles without storing in a warehouse. This allows efficient consolidation of products and decreases inventory levels, product flow time, and costs. It is commonly used in retail, third party logistics, automotive, and electronics industries. Benefits include reduced inventory, faster delivery, and lower costs and space needs. However, it requires extensive planning and management to operate effectively. The document provides details on the implementation process and gives an example of a large third party logistics firm in Turkey that utilizes cross docking.
Commodity wise import export from india to world and world to india. Specific Coomodity taht is for mango with its HS code also given in deatils about its import and export it term of quantity and its value.
2. 2 Commodity Market
Defining a commodity:
A Commodity is any good, merchandise or produce of the land that
can be bought or sold.
A commodity is anything that has value, is used for commerce is
movable
Its is Important to note that when the commodity reaches the final
hands of the consumer it ceases to be a commodity.
Commodity Market
A Commodity market is a virtual or a physical place for trading
raw/primary products.
3. Lack of proper price dissemination
Fragmented and isolated
Interstate moment of goods
Lack of proper warehousing and transportation
Intermediaries
Processors are not allowed to buy from cultivators in most states
Distress sale
High volatility in spot prices
Diff tax and tariff structure for diff states
3
Problems With Physical Commodity Markets
4. Commodity Spot Market
In a spot market, a physical commodity is sold or
bought at a price negotiated between the buyer
and the seller.
Involves buying and selling of commodities in
cash with immediate delivery i.e. transfer of
ownership takes place immediately
Eg: If one wants to buy 10 tonne of rice today,
one can buy it in the spot market.
Delhi’s Azadpur Mandi
Two types: Physical spot market and electronic
spot market
Derivative Market
A commodity can be sold or bought via
derivatives contract as well
A futures contract is a pre-determined and
standardized contract to buy or sell
commodities for a particular price and for a
certain date in the future.
Eg:. But if one wants to buy or sell 10 tonnes
of rice at a future date, (say, after two
months), one can buy or sell rice futures
contracts at a commodity futures exchange
In practice, most futures contracts do not
involve delivery of physical commodity as
contracts are settled in cash through an
exchange
4
Commodity spot and Derivative Market
5. Over the Counter derivatives
OTC derivatives are contracts that are
privately negotiated and traded between
two parties, without going through an
exchange.
The market players trade with one another
through telephone, email, and proprietary
electronic trading
Market participants are free to negotiate
any mutually attractive deal
There is a small risk that the contract will
not be honored as are generally not
regulated by a regulatory authority.
Exchange traded derivatives
Exchange traded derivatives contracts are
fully standardized
Require payment of an initial deposit or
margin settled through a clearing house.
The contract terms are specified by the
derivatives exchanges.
5
Over the Counter and Exchange Traded Contracts
6. A derivative is an instrument whose value depends on, or is derived from,
the value of more basic underlying assets
The Underlying Securities for Derivatives are:
(a) Commodities (Castor seed, Grain, Coffee beans, Gur, Pepper, Potatoes
etc.)
(b) Precious Metals (Gold, Silver)
(c) Short-term Debt Securities (Treasury Bills)
(d) Interest Rate
(e) Common Shares/Stock
6 Derivatives
7. 7
Difference between Commodity and Financial derivative
Basis Commodity derivative Financial derivatives
Nature of product Commodities are physical assets and may
pronounced seasonality, which needs to be
factored in while trading in them Eg- Gold, silver,
cotton, wheat
In financial derivative the underlying
asset is a financial asset such as
equity shares, bonds, debentures,
interest rates, stock index, exchange
rate etc
Delivery Process Sequence of steps that must be completed in
specific order and at pre-determined time interval
Majority of the derivatives are cash
settled
Quality of underlying
assets
Grading plays a crucial role. Commodity
derivatives contracts specify standards and quality
assurance and certification procedures
Underlying is a financial asset and
the question of grading does not arise
Warehousing Warehousing plays a central role. Physical delivery
of commodities is effected through accredited
warehouses on maturity
Exchange of securities and cash is
effected through account transfers in
bank accounts
8. 8 Types of Derivatives
Derivatives
Forward Future Options
9. 9
Farmer- Shyam (Sell)
(Short Position)
•10 Cows in Jan 2022
•Assumes in Dec 2020 there will
be disease related to cows
•Wants to sell his cow at Rs
150/each
Broker
Farmer- Ram (Buy)
(Long Position)
•Wants to buy 10 Cows in
Dec 2022 at Rs150/each
•Assumes there would be
no disease
Price at which they agree upon- Strike Price, “K”
Example
10. Scenario 1: When there is actually a disease
Suppose on 15th Dec price of cow in the market is Rs 40/ cow
Q1) How much does Shyam gain on each cow?
Rs 110/cow and for 10 cows he earns profit of Rs 1100
Q2) How much does Ram lose on each cow?
Rs 110/cow and for 10 cows he loses a sum of Rs 1100
10
11. Scenario 2: No disease spread
Suppose on 15th Dec price of cow in the market is Rs 190/ cow
Q1) By selling the cows at Rs150/cow has Shyam reduced his risk?
Q2) What can be the maximum loss of Ram?
Rs 1500, if the cows become worthless
Q3) What can be the maximum profit of Ram?
Infinite
Q4) What can be the maximum profit of Shyam?
Rs 1500
Q5) What can be the maximum loss of Shyam?
Infinite
11
12. A forward contract or simply a forward is a non standardized contract between two
parties to buy or to sell an asset at a specified future time at a price agreed upon today,
making it a derivative instrument. A forward contract is traded in the over-the-counter
market
In a forward Contract
• Terms of contract is tailored to suit the needs of the buyer and the seller
• Generally no money changes hands when the contract is first negotiated and is
settled on maturity
• Most of the contracts are held till the expiry date.
12 Forward Contract
13. Commodity futures contracts are agreements made on a futures exchange to buy or
sell a commodity at a pre-determined price in the future.
The buyer enters into an obligation to buy, and the seller is obliged to sell, on a specific
date.
Commodity Futures contracts are highly uniform and are well-defined. Futures are
standardized in terms of size, quantity, grade and time, so that each contract traded on
the exchange has the same specifications and the terms of the contract are
standardized by the exchange.
Eg: If the hotel owner wants to buy 10 tonnes of wheat for future use, he can buy
wheat future contracts at the commodity future exchange
India has six commodity Exchanges in India-MCX, NCDEX, NMCE, ICEX DERIVATIVES,
UCX AND numerous other regional exchanges.
14
Futures Contract
14. Standardization
Clearing house
Margins
Exchange based trading
No default risk
15 Important Features of Futures Contract
15. Example: A person has purchased a futures contract at Rs 100
Long Pay-off= St-F
Where St: spot price of the asset at the expiry of the contract
F: futures contracted price (i.e., Futures buy price)
16
Spot Price at
expiry
Long future payoff
50 -50
60 -40
70 -30
80 -20
90 -10
100 0
110 10
120 20
130 30
140 40
150 50
Long Position (Buy)
16. Example: A person sells (shorts) a futures contract at Rs 100.
Short Pay-off=F-St
17
Short Position (Sell)
Spot Price at
expiry
Long future
payoff
50 50
60 40
70 30
80 20
90 10
100 0
110 -10
120 -20
130 -30
140 -40
150 -50
17. Basis Forward Contract Futures Contract
Trading Platform Forward contracts, by nature, are
over the counter (OTC) contracts.
Futures are always traded on a
recognized exchange.
Structure Forwards can be customized as per
the specific requirements of the
buyer and the seller.
Highly standardized by the exchange in terms of
quality, quality and delivery dates.
Transaction
method
Negotiated directly by the buyer and
seller
Quoted and traded on the Exchange
Market regulation Not regulated Government regulated market
18
Comparison between forward and future Contracts
18. Risk High counterparty risk Low counterparty risk as exchange
becomes the central counter-party and
guarantees settlement of trade.
Guarantees No margin money therefore no guarantee
of settlement until the date of maturity
only the forward price
Both parties must deposit an initial
guarantee (margin).
Contract Maturity Forward contracts generally mature by
delivering the commodity.
Future contracts may not necessarily
mature by delivery of commodity.
Contract size Depending on the transaction and the
requirements of the contracting parties.
Standardized
Price Remains fix till maturity Changes everyday
Mode of Delivery Specifically decided. Most of
the contracts result in
delivery
Standardized. Most of the
contracts are cash-settled.
19
Cont…
19. Options provides additional flexibility in managing price risk.
An options contact is an agreement between a buyer and a seller that gives
the purchaser of the option the right to buy or sell a particular asset at a
later date at an agreed upon price.
Can be standarized or customized. Options are traded both on exchanges
and in the over-the-counter market
Call: An option to buy`
Put: An option to sell
20 Options Contract
20. In the option transaction, the purchaser pays the seller (writer of an
option), an amount for the right to buy (in case of “call” option) or for the
right to sell (in case of “put option). This amount is known as “Option
Premium”.
Buyer of an Option- Is the one who has a right but no obligation in the
contract. He pays a price to the seller called Option Premium
Writer of an option- Is the one who receives the option premium and is
thereby obliged to sell/buy the asset if the buyer exercises his rights
Long call –Buying an option to buy
Long put –Buying an option to sell
Short call -selling an option to buy / From me
Short put-Selling an option to sell/ to me
21
21. 22 Long Call (Buying an option to buy)
Sham
Wants to sell A phone for
100$ after 2 months (1st Oct
2022)
Ram
Wants to buy a phone worth
100 $ after 2 months (1st Oct
2022)
He pays option premium of 5$
to sham
Q1) If the spot price is 0 will Ram enter into the contract?
Q2) What will be the loss of Ram?
Q3) If the spot price is 90, 100 will Ram enter into the contract?
Q4) Till what price will Ram not buy the phone from Sham?
Q5) If the spot price is 102 will Ram enter into the contract?
Q6) If the spot price is 105 and 110 will Ram enter into the contract?
Q7) What will be maximum gain of Ram?
If the spot price 102 $,
Ram will buy the phone
from sham at 100 $ and
sell in the market at 102$
and earn 2$ but as he had
paid an option premium
of 5$ he will incur at loss
of 3$
22. 23
Long Call (Buying an option to buy)
Market
Price
Strike
price
Premiu
m
Enter/exit Profit/Loss
0 100 5 Exit -5
70 100 5 Exit -5
80 100 5 Exit -5
90 100 5 Exit -5
100 100 5 Indifferent -5
102 100 5 Enter -3
105 100 5 Enter 0
110 100 5 Enter 5
23. Q1) If the spot price is 0, then what will be the Profit/loss of Sham?
Q3) What will happen If the spot price is 90$ and 100$ and what would
be the Profit/loss of Sham?
Q4) What will happen If the spot price is 102$ and 105$ and what would
be the Profit/loss of Sham?
Q5) What would be the maximum loss of Sham?
24 Short Call (selling an option to buy) (From me)
24. Profit from writing one call option: Option price = $5, strike price = $100
25 Short Call (selling an option to buy) (from me )
Market
Price
Strike
price
Premium Enter/exit Profit/Loss
0 100 5 Exit 5
70 100 5 Exit 5
80 100 5 Exit 5
90 100 5 Exit 5
100 100 5 Indifferent 5
102 100 5 Enter 3
105 100 5 Enter 0
110 100 5 Enter -5
25. 26 Long Put (Buying an option to sell)
Ram
Wants to sell the phone at
$ 70 and he pays Option
premium of 7 $ to sham
to sell after 2 months say
1st Oct 2022
Sham
Wants to buy the phone at $
70
Q1) Will Ram enter the contract if the spot price is 100$
Q2) What will be the maximum loss of Ram?
Q3) Will Ram enter the contract if the spot price is 70$
Q4) Will Ram enter the contract if the spot price is 65? How much will he gain or lose?
Q4)What will happen if the spot price is 63$
Q5) What will happen if the spot price is 0 or what would be the maximum profit of Ram?
26. 27 Long Put (Buying an option to sell)
Market
Price
Strike
price
Premium Enter/exit Profit/Loss
100 70 7 Exit -7
90 70 7 Exit -7
80 70 7 Exit -7
70 70 7 Indifferent -7
65 70 7 Enter -2
63 70 7 Enter 0
50 70 7 Enter 13
0 70 7 Enter 63
27. As sham has already sold his options to Ram, so Ram will be a decision
maker
Q1) What will happen if Spot price is $100, 90, 80? What will be the
maximum profit/loss of sham?
Q2) What will happen if Spot price is $70?
Q3) What will happen if Spot price is $68?
Q4) What will happen if Spot price is $63?
Q5) What will be the maximum loss of Sham?
28 Short Put (Selling an option to sell) (TO ME)
28. 29 Short Put (Selling an option to sell)
Market
Price
Strike
price
Premium Enter/exit Profit/Loss
100 70 7 Exit 7
90 70 7 Exit 7
80 70 7 Exit 7
70 70 7 Indifferent 7
65 70 7 Enter 2
63 70 7 Enter 0
50 70 7 Enter -13
0 70 7 Enter -63
29. Hedgers: A person who invests in financial markets to reduce the risk of price volatility in exchange markets,
i.e., eliminate the risk of future price movements. Hedging means taking a position in the derivatives market that
is opposite of a position in the physical market with the objective of reducing or limiting risks associated with the
price changes.
30
PARTICIPANTS IN DERIVATIVE MARKET
Date Spot Market Future market
1st June A jeweler needs to buy 1 kg of gold
at end-July at Rs 50,000 per 10
grams to make desired profit and
make a provision for INR 50.00 lakhs
to buy 1 kg of Gold.
August Futures is trading at Rs
50,400 per 10 grams. He buys
one August gold futures contract at
the rate of Rs 50,400 per 10 grams.
(1 contract = 1 kg)
31st July At end of July, gold is trading at Rs
51,600 per 10 grams in the spot
market. The jeweler pays Rs 51.60
lakhs to buy one kg gold.
August futures is trading at Rs 52,000
per 10 grams. He sells the futures at
Rs 52,000 and squares off his
position in August month futures and
makes a profit of Rs 1,60,000.
Result Loss in the spot market= 1,60,000 Gain in the future market= 1,60,000
30. Speculators: Are traders who speculate on the direction of future prices with the
goal of making profit. They are not end users of the underlying commodity and do not take
physical delivery of the commodity and instead liquidate their position prior to or upon
expiry of the contract.
Long Speculator: Those who buy first and expect the price to increase from current level.
Short Speculator: Those who sell first and expect the price to decrease from current level.
Arbitragers: A profit-making activity in financial markets that comes into effect by
taking advantage of or profiting from the price volatility of the market. These situation are
very rare and they remain for shorter duration
31
31. An Arbitrage Opportunity ?
Suppose Spot price of gold is US $1400
The one year forward price of gold is US$1500
The one year interest rate is 5%
32
Step 1: Go to the bank and take a loan of US $1400 at interest rate of 5% for 1 year
Step 2: Buy gold of US $1400
Step 3: (Short) Sell gold in the market as one year forward price of gold is US$1500 .
You will earn US$1500
Step 4: Return US$ 1470 to the bank and profit received is US $30
33. Large demand for and supply of the physical commodity
There should be fluctuations in prices of that commodity
The commodity should have long shelf life
The commodity should be capable of standardization and gradation
The delivery points where farmers need to physically deliver the underlying commodity
should not be too far away from the harvest place.
34 Which commodities are suitable for futures trading?