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International Certificate in Banking Risk and Regulation (ICBRR) Questions 156–160 (page: 33)

To estimate the forward price of oil, a commodity trader would most likely use the following pricing relationship:

To protect the oranges harvest price level, a farmer needs to take a hedge position. Provided that he produces the amount he hedged, which one of the following four strategies will allow the farmer to accomplish his goal?

Bank customers traditionally trade commodity futures with banks in order to achieve which of the following goals?

I) To express their own price views
II) To reverse undesired short-term exposure created from fixed commodity sales
III) To reach short-term budgetary targets

Since most consumers of natural gas do not have the ability to store it, they contract with gas suppliers to receive a flow of natural gas equal to a specific number of MMBT's per day (MMBT is millions of British Termal Units, the unit in which gas futures are quoted on the U.S. markets). To protect against price increases with a bank, the natural gas consumer, concerned with the average price over the course of the month, will use the following contracts:

In additional to the commodity-specific risks, which of the following risks represent the main commodity derivative risks?

I) Basis
II) Term
III) Correlation
IV) Seasonality