Derivatives

Commodity Swap

Definition

What is Commodity Swap?

A swap exchanging payments based on a commodity price.

Example in practice

An airline fixes part of its fuel cost through a commodity swap.

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A contract whose value depends on an underlying asset, rate, index, or event.

The asset, rate, index, or reference on which a derivative's value is based.

The reference amount used to calculate derivative payments, which may exceed the cash initially exchanged.

A strategy that owns the underlying asset and sells call options against it.

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