Chapter 9

Question 1

What is the commodity market?

Answer 1

A physical market where products such as maize, gold and silver are traded and a financial market in which commodities-based financial instruments are traded.

Question 2

Who are the participants in the commodities market?

Answer 2

Producers
Consumers
Spot market traders
Commodity trading advisors
Hedge funds
Investors

Question 3

Are commodities traded on an exchange or OTC?

Answer 3

Both

Question 4

What are some commodity trading instruments?

Answer 4

Spot, forwards, swaps, futures, options

Question 5

Although there is both spot and derivatives trading of commodities on commodity exchanges, the vast majority is in …..?

Answer 5

Derivatives

Question 6

What is a commodity?

Answer 6

It is a tangible assets that intrinsic value

Question 7

How does commodities differ from bonds and equities?

Answer 7

Commodities are investable assets. They are not capital assets.
Commodities do not generate dividends, interest payments or other income.
Commodities are valued because they can be consumed or changes into something else. Their value is determined by supply and demand

Question 8

What are the possible ways to invest in commodities?

Answer 8

Directly, shares of commodities producers, commodity futures, commodity index funds, exchange traded funds and notes, exchange traded commodities