NISM Series XVI - Commodity Derivatives Exam Notes

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  • Call option contracts give the purchaser the right to buy a specified quantity of a commodity or financial asset at a particular price (the exercise price) on or before a certain future date (the expiration date).
  • Put option contracts give the buyer the right to sell a specified quantity of an asset at a particular price on or before a certain future date
  • Swaps are agreements between two counterparties to exchange a series of cash payments for a stated period of time.
  • The periodic payments can be charged on fixed or floating price, depending on the terms of the contract. One of the commonly used commodity swaps is 'fixed-for-floating swaps'.
  • Swap is a pure financial transaction that is used to lock in the long-term price and there is no physical delivery of the commodity and there is net cash settlement on maturity. Currently, commodity swaps are not allowed in India.
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NISM Commodity Derivatives

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