Commodity price risk

This one is not written up yet

The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.

Written up from the same chapter

• Basic Services Demat AccountA low-cost demat account for a small investor who holds only one demat account and whose holdings stay within Rs 2 lakh of debt and Rs 2 lakh of non-debt securities — its annual charge can be nil.
• Business riskThe variability of a firm's income flows caused by the nature of its business — driven by how volatile its sales are and how much of its cost base is fixed.
• DepositoryAn institution that holds investors' securities in electronic form and provides the services needed to transact in them — the securities equivalent of a bank holding money rather than cash.
• Depository participantThe SEBI-registered agent through whom an investor reaches a depository — NSDL and CDSL cannot open investor accounts themselves, so every demat account is opened and operated through a DP.
• Forward contractA bilateral, over-the-counter agreement between two parties to buy or sell an asset on a fixed future date at a price agreed today — customised to suit them, and binding on both.
• Futures contractA standardised forward traded on an exchange, where the exchange fixes every term except the price and the clearing corporation guarantees settlement, so neither side carries the other's default risk.