The CME Group Risk Management Handbook: Products and Applications (Wiley Finance) by John W. Labuszewski & John E. Nyhoff & Richard Co & Paul E. Peterson

Author:John W. Labuszewski & John E. Nyhoff & Richard Co & Paul E. Peterson [Labuszewski, John W.]
Language: eng
Format: mobi
ISBN: 9780470634875
Publisher: Wiley
Published: 2010-05-25T04:00:00+00:00

WHAT ARE COMMODITIES?

From the outset, let us pause to consider a very simple question: What is a commodity? Commodities are products that are substantially identical regardless of the producer or originator. They are typically thought of as minimally processed products that serve as raw materials or inputs for the production of more refined products. Commodities are not branded but can, and typically do, conform to commonly accepted industrywide grades or standards.

Commodities are said to be homogeneous. As a result of this homogeneity or uniformity, one unit of a particular commodity is perfectly substitutable with another unit of the same commodity. In other words, and in the industry vernacular, the product is fungible.

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