Futures Contract and Commodity Exchange

13026 Words May 21st, 2012 53 Pages
COMMODITY MARKET

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INDEX

|Chapter No |Topic |Page No. |
|1 |Introduction to Commodity Market |04 |
|2 |History of Evolution of Commodity Markets |08 |
|3 |India and the Commodity Market |10 |
|4 |International Commodity Exchanges |15 |
|5
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This can especially noticed in agricultural commodities where the weather plays a major role in affecting the fortunes of people involved in this industry. The futures market has evolved to neutralize such risks through a mechanism; namely hedging.

The objectives of Commodity futures: - • Hedging with the objective of transferring risk related to the possession of physical assets through any adverse moments in price. Liquidity and Price discovery to ensure base minimum volume in trading of a commodity through market information and demand supply factors that facilitates a regular and authentic price discovery mechanism.

• Maintaining buffer stock and better allocation of resources as it augments reduction in inventory requirement and thus the exposure to risks related with price fluctuation declines. Resources can thus be diversified for investments. • Price stabilization along with balancing demand and supply position. Futures trading leads to predictability in assessing the domestic prices, which maintains stability, thus safeguarding against any short term adverse price movements. Liquidity in Contracts of the commodities traded also ensures in maintaining the equilibrium between demand and supply. • Flexibility, certainty and transparency in purchasing commodities facilitate bank financing. Predictability in prices of commodity would lead to stability, which in turn would eliminate the risks associated with running the
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