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Derivatives: Question 5 Solution

Which one of the following statements is the best description of a commodity swap?

A) A portfolio of forward contracts obligating the fixed price payer to buy the commodity at the settlement (reset) dates, at the swap price

B) An agreement to buy or sell a commodity at the spot price that prevails in the future

C) A portfolio of options allowing the fixed price payer to buy the commodity at the settlement (reset) dates, at the swap price

D) All of the above

Reveal the Answer

The answer is A) A portfolio of forward contracts obligating the fixed price payer to buy the commodity at the settlement (reset) dates, at the swap price

Develop a comprehensive, practical understanding of derivative instruments including market conventions, contract specifications, valuation, trading strategies and the regulation of derivatives markets.

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