Commodity History

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Recommended: Introduction on the california gold rush

There are many definitions of a commodity, some more elaborate than others. Examples are: (i) A product which trades on a commodity exchange; this would also include foreign currencies and financial instruments and indexes. (ii) A physical substance, which is interchangeable with another product of the same type, which investors buy or sell, usually through futures contracts. The price of the commodity is subject to supply and demand. Risk is actually the reason exchange trading of the basic agricultural products began. For example, a farmer risks the cost of producing a product ready for market at sometime in the future because he doesn't know what the selling price will be. (European Merchant exchange) It is explained within these definitions commodities are often sold in future contracts by investors, which is an agreement to buy or sell a commodity in a designated future period at a price agreed upon at the commencement of the contract by the buyer and seller. Future contracts are standardised according to the quality, quantity, delivery time and location of the commodity. A future contract differs from an option, an option gives one of the parties a right and the other an obligation to buy or sell. While a future contract represents a requirement of parties, one to deliver and the other to accept delivery. A future contract is part of a class of securities called derivatives, named because securities derive their value from the worth of an underlying investment ( Farlex 2011). Like in the case of Ryanair’s Chief executive officer Michael O’Leary, after September 11th he invested heavily in aircrafts as the prices dropped dramatically following the attacks. Airlines are notable for hedging to protect fuel costs. Hedg... ... middle of paper ... ...ilosophic Manuscripts (1844) Rawls, James J. and Orsi, Richard J. (eds.) (1999). A golden state: mining and economic development in Gold Rush California (California History Sesquicentennial Series, 2). Berkeley and Los Angeles: University of California Press. p. 187 (Geisst.C pg 95). And page 134 wheels of furtune (Markham. J 1987) Lewis. M 2009 The story of modern financial insanity Johnson R. 1999 pg 96 McKibbin, W.J., A. Stoeckel (2009), “Modelling the Global Financial Crisis. Centre for Applied Macroeconomic Analysis,” The Australian National University, Working Paper 25/2009. Rose A., M. Spiegel (2009), “Cross-Country Causes and Consequences of the 2008 Crisis: International Linkages and American Exposure”, NBER Working Paper 15358. Chaudhuri, K. [2000], Long Run Prices of Primary Commodities and Oil Prices, Working Papers, The University of Sydney.

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