NISM Series XVI - Commodity Derivatives Exam Notes
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An electronic spot commodity exchange provides a marketplace where the farmers or their Farmer Producer Organisation (FPO) can sell their produce and the processors, exporters, traders and other users can buy such produce through an electronic trading system
Derivatives help in transfer of risks from hedgers to speculators.
Price discovery in spot markets refers to the process of determining commodity price through forces of market demand and supply.
A forward contract is a legally enforceable agreement for delivery of goods or the underlying asset on a specific date in future at a price agreed on the date of contract
Commodity Futures contracts explicitly state the commodities (quantity and quality of the goods) that have to be delivered at a certain time and place (acceptable delivery date) in a certain manner (method for closing the contract) and define their permissible price fluctuations (minimum and maximum daily price changes)
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