Products for hedging risks of fluctuating commodity prices
Commodity swap
This refers to a transaction wherein one party pays (once or periodically) floating amounts in a specified currency calculated from a notional amount in the given currency and a floating price and the other party pays (once or periodically) fixed amounts in the same currency calculated from the same notional amount at a fixed price.
Commodity option
This refers to a transaction wherein the seller of the option pays (once or periodically) floating amounts in a specified currency calculated from a notional amount in the same currency and from the difference between the floating price and a limit price. The buyer of the option pays the option premium to obtain the right to this cash flow.
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