Generally speaking, the purpose of commodity swaps is to reduce the risk for a given part within the swap. A party wishing to hedge its risk against fluctuations in a specified price of raw materials must enter into an exchange of goods and undertake, on the basis of the above-mentioned contract, to accept a specified price that it will pay or receive during the term of the agreement. The impact of index and swap funds on commodity futures markets, Irwin, S.H., &Sanders, D. R. (2010). This study analyses the price effect of long-only funds from January 2004 to January 2008 on commodity futures markets. The authors draw the positions of index traders in twelve markets every day from the large internal trader reporting system that uses the CFTC. Index traders influence the future returns of commodities, regardless of whether the market participation ratio is taken into account. The results are that the signs of a small number of important coefficients are relatively negative and positive and that the economic impact is sufficiently small. The presence of index traders in many markets has affected volatility, but uses only one measure of changes in index positions.
Here we can see that an end consumer of a commodity and a swap seller have entered into an exchange of commodities. Often, the final consumers of a commodity, such as for example. B fuel-intensive industries, will try to pay a fixed price. In this example, the end user pays a fixed price and gets the market price of the commodity. During the swap, no commodity is exchanged, but cash is exchanged. In the case of commodity swewings, the cash flows traded depend on the price (Floating/Market/Spot) of an underlying commodity. This is more or less similar to a fixed interest rate swap, the difference is that the floating leg is based on the price of the underlying commodity and not on LIBOR or EURIBOR. Thinking of a swap as a bunch of money attackers is also a useful and intuitive way to interpret interest rate swaps or stock swaps.
2) Regarding the date of futures trading/swap by definition, the cash exchange and price finalization will take place at some point in the future. In other words, trading is carried out on the current date, so the trading date is today to make an exchange at a future time. Today, if you have made a trade for today`s delivery (physical delivery), the trade is called “physical trade” (not “forward/swap”). . . .