Commodity Swaps Essay

4952 Words Jul 19th, 2011 20 Pages





Dealing with Commodity Price Uncertainty
Plantos Varangis Dont Larson

Market liberalization has increased the appeal of commodity derivative instruments (such as futures, options, swaps, and commodity-linked notes)as a means of managing price

uncertainty. many In emerging countries both government and the private sector are increasinglyusing these instruments.

The World Bank International Economics Department Commodity Policy and Analysis Unit October 1996


Summary findings
Liberalization in commodity markets has brought profound changes in the way price risks are allocated and managed in commodity subsectors. Price risks are increasingly
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And several developing and transition economies have sought to establish commodity derivative exchanges.

This paper - a product of the Commodity Policy and Analysis Unit, International Economics Department - is part of a larger effort in the department to investigate alternative price risk management and finance systems under market liberalization. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Jean Jacobson, room NS-032, telephone 202-473-3710, fax 202-522-3564, Internet address October 1996. (44 pages)

rhe Policy Research WorkingPaperSeries disseminates findings of work in progress encourage exchange ideasabout the to the of development issues. objectiveof the series to get thefindingsout quickly, An is evenif thepresentations lessthan fully polished.'I'he are papers carry the names the authorsand shouldbe usedand citedaccordingly.Thefindings,interpretations. of and conclusions the are authors' own andshould not heattributed to the WorldBank, its Executive Boardof Directors,or any of its membercountries.

Produced by the Policy Research Dissemination Center

Dealing with Commodity Price Uncertainty

Panos Varangis and Don Larson

CommodityPolicyand AnalysisUnit InternationalEconomicsDepartment WorldBank

TABLE OF CONTENTS Summary 1. Why Deal with Price Uncertainty? 2. Categories of Instruments to Manage

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