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FRM-1 Study Notes

Some Important Commodities and their Properties

Commodity Demand Production Property Futures Price
Corn Constant throughout the year Seasonal Production Interest and Storage Cost determines the price Increases until harvest time and then drops sharply
Natural Gas Seasonal Demand Produced throughout the year Too expensive to store / Demand peaks in winter Futures price rise steadily in fall months
Oil Constant world-wide demand Produced throughout the year Can be cheaply transported Oil prices are stable in absence of short-run
supply and demand
Electricity Price is determined by the demand and supply at a given point in time Non-storable Futures prices of electricity is more volatile than financial futures

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