Commodity swap

A commodity swap is an agreement where by a floating (or market or spot) price based on an underlying commodity is exchanged for a fixed price over a specified period.

A Commodity swap is similar to a Fixed-Floating Interest rate swap. The difference is that in an Interest rate swap the floating leg is based on standard Interest rates like LIBOR, EURIBOR etc but in a commodity swap the floating leg is based on the price of underlying commodity like Oil, Sugar etc. No Commodities are exchanged during the trade.

In this swap, the user of a commodity would secure a maximum price and agree to pay a financial institution this fixed price. Then in return, the user would get payments based on the market price for the commodity involved.

On the other side, a producer wishes to fix his income and would agree to pay the market price to a financial institution, in return for receiving fixed payments for the commodity.

The vast majority of commodity swaps involve oil.

This economic term article is a stub. You can help Wikipedia by expanding it.v · Categories: Commodities market Economic term stubs Wikimedia Foundation. 2010. Игры ⚽ Поможем написать реферат Stockinette Vicente Guterres Look at other dictionaries: Commodity Swap — A swap in which exchanged cash flows are dependent on the price of an underlying commodity. A commodity swap is usually used to hedge against the price of a commodity. The vast majority of commodity swaps involve oil. So, for example, a company… …   Investment dictionary swap agreement — (53B) The term swap agreement (A) means (i) any agreement, including the terms and conditions incorporated by reference in such agreement, which is (I) an interest rate swap, option, future, or forward agreement, including a rate floor, rate cap …   Glossary of Bankruptcy Commodity Broking Services — Type Private Industry Finance Founded 2004 Headquarters Sydney, Australia Key people Jonathan Barratt, Managing Director Paul …   Wikipedia swap — / swäp/ n 1: an exchange of securities 2: a derivative contract in which two parties (as corporations) agree to exchange rates esp. relating to debt Merriam Webster’s Dictionary of Law. Merriam Webster. 1996 …   Law dictionary Commodity Futures Modernization Act of 2000 — The Commodity Futures Modernization Act of 2000 (CFMA) is United States federal legislation that officially ensured the deregulation of financial products known as over the counter derivatives. It was signed into law on December 21, 2000 by… …   Wikipedia Commodity Futures Trading Commission — U.S. Commodity Futures Trading Commission Official seal Agency overview Formed April 15, 1975 Preceding agency Commodity Exchange Authority …   Wikipedia Swap (finance) — For the Thoroughbred horse racing champion, see: Swaps (horse).In finance, a swap is a derivative in which two counterparties agree to exchange one stream of cash flows against another stream. These streams are called the legs of the swap.The… …   Wikipedia Commodity price index — A commodity price index is a fixed weight index or (weighted) average of selected commodity prices, which may be based on spot or futures prices. It is designed to be representative of the broad commodity asset class or a specific subset of… …   Wikipedia Commodity currency — Foreign exchange Exchange rates Currency band Exchange rate Exchange rate regime Exchange rate flexibility Dollarization Fixed exchange rate Floating exchange rate Linked exchange rate Managed float regime Markets Foreign exchange market Futures… …   Wikipedia Plain Vanilla Swap — The most basic type of forward claim that is traded in the over the counter market between two private parties, usually firms or financial institutions. There are several types of plain vanilla swaps, such as the plain vanilla interest rate swap …   Investment dictionary 18+ © Academic, 2000-2024 Contact us: Technical Support, Advertising Dictionaries export, created on PHP, Joomla, Drupal, WordPress, MODx. Mark and share Search through all dictionaries Translate… Search Internet Share the article and excerpts Direct link … Do a right-click on the link above and select “Copy Link”