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Outline
Research Objective Research Design & Methods What is Hedging? Survey of Data & Questionnaire Conclusion & Suggestions
Research Objective
To study the functioning of commodity market. To study the options available to minimize the risk and increase profits on investments made. To study the risk that a firm faces from price fluctuation of aluminum in the commodity market. Future benefits of the hedging strategy.
Data Source: Primary Sources: Primary data is covered from Manufacturer of aluminum products through questionnaire and interview. Secondary Source: Secondary data is obtained from Books, Magazines, Newspapers and Internet websites. Sample size: Sample size: 40 Manufacturing Units.
Commodities
Metals
Precious Metals
Gold/Silver PGM
Energy
Crude Oil Natural Gas Aluminium
Farm Commodities
Farm Animals
Live Cattle Grains
Corn Wheat Oats Barley
Base Metals
Agro Products
Oil Complex
Soybean Canola Soymeal Soy oil
Food
Cocoa Coffee Sugar Spices
Fiber
Cotton Jute
Propane
Copper
Lean Hogs
Pork Bellies
Electricity
Zinc Nickel
Tin Lead
What is hedging?
Hedging is the most common method of price risk management. It is the strategy of offsetting price risk that is inherent in a spot market by taking an equal but opposite position in the futures market. A Hedging is an investment that is taken out specifically to reduce or cancel out the risk in another investment. Hedging is designed to minimize exposure to an unwanted business risk.
An Example - Guarseed
10%
YES NO
90%
65%
45%
4. Is the raw material used by you being currently traded in the market?
27%
YES NO
73%
100%
0%
FUTURE FORWARD
48%
27%
CONCLUSION
Lack of knowledge regarding hedging Insufficient fund for margin Tedious task Raw material used is not traded in the exchange.
SUGGESTIONS
As aluminum utensil scrap is being used by 45% of manufacturers but it is not available for hedging on exchange. The exchange should allow trading this type of aluminum. The government should start awareness program because 48% of total manufacturers are not aware about hedging.
Thank You