BAIB3004 Week 10 24/25

Which of the following is not considered a commodity?

• Crude oil

• Wheat

• Smartphone

• Gold

In a futures contract, the buyer and seller agree to:

• Exchange a commodity immediately at the current price

• Exchange a commodity at a future date at a predetermined price

• Exchange a commodity only if the price increases

• Exchange a commodity at a price determined on delivery day

Which of the following is a key difference between OTC markets and commodity exchanges?

• OTC markets are more transparent

• OTC contracts are standardised

• OTC contracts are customisable and negotiated privately

• OTC markets only trade agricultural products

Who would most likely use futures contracts to hedge against rising fuel prices?

• A gold miner

• An airline company

• A smartphone manufacturer

• A fashion retailer

Which of the following best describes a call option in commodity trading?

• The right to sell a commodity at a set price

• The obligation to buy a commodity at a set price

• The right to buy a commodity at a set price

• The obligation to sell a commodity at a set price

What is the main advantage of using electronic trading platforms for commodity trading?

• They eliminate all trading risks

• They allow for faster and more transparent transactions

• They only allow trading during business hours

• They require in-person attendance

In a commodity swap, two parties typically exchange:

• Physical goods

• Fixed and floating price payments

• Company shares

• Government bonds

Which participant is primarily focused on reducing price risk in commodity markets?

• Speculator

• Hedger

• Arbitrageur

• Regulator

A long-term contract between a producer and a buyer is most likely to be used when:

• The parties want flexibility and short-term deals

• The commodity is highly perishable

• Both parties desire price stability and supply security

• The market is extremely volatile and unpredictable

Which of the following best describes the primary function of a commodity exchange?

• To regulate the prices of commodities worldwide

• To facilitate standardised trading of commodities through spot and futures contracts

• To provide loans to commodity producers

• To manufacture raw materials for global markets