Commodity risk

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Categories of financial risk

Credit risk Concentration risk

Market risk Interest rate risk Currency risk Equity risk Commodity risk

Liquidity risk Refinancing risk

Operational risk Legal risk Political risk

Reputational risk

Volatility risk

Settlement risk

Profit risk

Systemic risk

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Commodity risk refers to the uncertainties of future market values and of the size of the future income, caused by the fluctuation in the prices of commodities.[1] These commodities

may be grains, metals, gas, electricity etc. A commodity enterprise needs to deal with the following kinds of risks: Price risk (Risk arising out of adverse movements in the world prices, exchange rates, basis between local and world prices) Quantity risk Cost risk (Input price risk) Political risk

[edit]Groups

at Risk

There are broadly four categories of agents who face the commodities risk: Producers (farmers, plantation companies, and mining companies) face price risk, cost risk (on the prices of their inputs) and quantity risk Buyers (cooperatives, commercial traders and trait ants) face price risk between the time of up-country purchase buying and sale, typically at the port, to an exporter. Exporters face the same risk between purchase at the port and sale in the destination market; and may also face political risks with regard to export licenses or foreign exchange conversion. Governments face price and quantity risk with regard to tax revenues, particularly where tax rates rise as commodity prices rise (generally the case with metals and energy exports) or if support or other payments depend on the level of commodity prices. [edit]See

also

Fuel price risk management Sprott Molybdenum Participation Corporation Uranium Participation Corporation

[edit]References 1. ^ International Monetary Fund (2005). Financial Sector Assessment. ISBN 0821364324.

[hide]v d eFinancial risk and financia Credit riskConsumer Credit Risk Concentration risk Securitization Credit derivative Market riskInterest rate risk Currency risk Equity risk Commodity risk Categories Liquidity riskRefinancing risk Operational riskOperational risk management Legal risk Political risk Reputational risk Volatility risk Settlement risk Profit risk Systemic risk Risk modeling Market portfolio Risk-free rate Modern portfolio theory RAROC Value at risk Sharpe ratio

Basic concepts

Diversification Systematic risk Hedge Risk pool Expected return Hazard Risk

Investment management Financial economics

Categories: Financial risk | Commodities