NISM Series XVI - Commodity Derivatives Exam Notes

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  • tender period margin - increased by 1.5% every day. All open positions during the tender period or delivery period are subject to this margin.
  • From the accounting point of view there are 3 types of hedges - Fair Value Hedge, Cash Flow Hedge and Net Investment Hedge
  • Fair value is the price received for selling an asset or the price paid for transferring a liability in an arms-length transaction between knowledgeable and willing counterparties
  • A fair value hedge is a hedge of the exposure to changes in the fair value of an asset or liability that is attributable to a particular risk and could affect reported net profit.
  • The risk being hedged in a cash flow hedge is the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability, an unrecognised firm commitment (currency risk only), or a highly probable forecast transaction that could affect the income statement.
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NISM Commodity Derivatives

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