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3 videos •
In this video, Emma explains us the two settlement mechanisms for commodity derivatives, "physical-settlement" and "cash-settlement". She also examines how well the price of a commonly traded commodity derivative, the commodity forward, converges to the price of the underlying commodity under each settlement mechanism.
When there is good price convergence between a commodity derivative and the underlying physical, then the derivative is an excellent proxy for the underlying. In this video, Emma explains us how companies and investors deploy commodity forwards in their businesses.
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