LIBOR Transition Case Studies for Navigating Conduct Risks
After completing this reading, you should be able to: Discuss regulatory expectations on LIBOR transition and how these expectations can help market participants in their management of conduct risk arising from the transition. Analyze the risks of LIBOR transition from…
Holistic Review of the March Market Turmoil
After completing this reading, you should be able to: Identify the key market developments that took place during the March 2020 COVID-19 market turmoil, conditions that were prevalent, and their effects on the financial markets and its participants. Describe how…
Covid-19 and Cyber Risk in the Financial Sector
After completing this reading, you should be able to: Define cyber risk and describe the elements that constitute it. Describe and compare causes of cyber risks and methods of enacting cyber attacks. Identify and explain the effect COVID-19 has had…
The Rise of Digital Money
After completing this reading, you should be able to: Describe and compare different attributes of means of payment. Describe the risks faced by the banking sector as e-money adoption increases and identify means of mitigating those risks. Explain reasons for…
Construction of Commodity Indexes
Commodity indexes have been created to portray the aggregate movement of commodity prices, investment vehicles, and investment approaches. It can be said that an asset class does not exist without at least one representative index. A commodity index plays the…
Commodity Swaps and Exposure to Commodities
A commodity swap is a legal contract involving the exchange of payments over several dates as determined by specified reference prices or indexes relating to commodities. Swaps are an alternative to futures when investors want to gain market exposure or…
Roll Returns in Markets in Contango and Backwardation
Roll return is the amount of return generated in the futures market after an investor rolls a short-term contract into a longer-term contract and profits from merging the futures price toward a higher spot or cash price. When a market…
Components of Total Return for a Fully Collateralized Commodity Futures Contract
The total return on commodity futures is analyzed into the following key components: The price return (or spot yield). The roll return (or roll yield). The collateral return (or collateral yield). The Price Return This refers to the change in…
Theories of Commodity Future Returns
Insurance Theory The theory proposes that producers use commodity futures markets for insurance by locking in prices and making their revenues more predictable. It is also known as the theory of “normal backwardation” and has been proposed by economist John…
Spot and Future Price Comparisons in Contango and Backwadation Markets
Commodity prices are generally represented by: Spot price: Refers to the current price at which a physical commodity can be delivered to a specific location. It is, otherwise, the cost at which a physical commodity can be purchased and transported…
