Abstract
Commodity derivatives trading started in over-the-counter markets, but the trading has since expanded to exchange markets where futures contracts are now transacted, daily. Additionally, although, commodity derivatives were initially designed to hedge against adverse price movements in agricultural produce such as cotton, grain, pigs, and cattle they currently cover other aspects of commerce, such as minerals trading- encompassing, petroleum, gold and others. This paper reports on the various commodity derivatives trading, including agricultural produce; and, most importantly, on how the net cost of carry relations is used to explain the derivatives trading mechanism.
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