Mastering Investment Banking Securities

11

Commodity and credit derivatives

Background on commodity derivatives

Introduction to credit derivatives

BACKGROUND ON COMMODITY DERIVATIVES

Contracts for delivery of commodities at a future date were the pioneers of the derivatives market. The early agreements typically guaranteed the delivery of agricultural products (coffee, cocoa, grain, cotton etc.), nowadays known as ‘soft’ commodities. Present-day derivatives markets typically trade in contracts with energy (oil, gas and related products), bullion (precious metals) and base metals (copper, zinc, aluminium, nickel, lead and tin) as underlying securities. The major exchanges where derivatives are traded are the International Petroleum Exchange (IPE) in London, New York Mercantile ...