In this video we are discussing FRM Part I - Commodities Forward pricing possible alternative questions for exam.
Presenter: Shashank Wandhe, FRM (faculty Falcon Edufin)
After completing this reading, you should be able to:
• Explain the key differences between commodities and financial assets.
• Define and apply commodity concepts such as storage costs, carry markets, lease rate, and convenience yield.
• Identify factors that impact prices on agricultural commodities, metals, energy, and weather derivatives.
• Explain the basic equilibrium formula for pricing commodity forwards.
• Describe an arbitrage transaction in commodity forwards and compute the potential arbitrage profit.
• Define the lease rate and explain how it determines the no-arbitrage values for commodity forwards and futures.
• Describe the cost of carry model and determine the impact of storage costs and convenience yields on commodity forward prices and no-arbitrage bounds.
• Compute the forward price of a commodity with storage costs.
• Compare the lease rate with the convenience yield.
• Explain how to create a synthetic commodity position and use it to explain the relationship between the forward price and the expected future spot price.
• Explain the relationship between current futures prices and expected future spot prices, including the impact of systematic and nonsystematic risk.
• Define and interpret normal backwardation and contango.
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👉🏻ABOUT FACULTY
SHASHANK WANDHE, FRM
I am Certified FRM and helping FRM aspirants to reach their goals with unique teaching methods. I provide course training for FRM, CA FINAL AND R PROGRAMMING. Falcon Edufin team create content for various courses to help aspirants achieve success.
-4 years Teaching Experience
-Founder - Falcon Edufin
-Co Founder - ICA League
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