Commodity Price Risk Management


Commodity Derivatives are financial products used by companies to hedge the risk they run from changes in commodity prices. The structure of these products is similar to the structure of interest rate risk management products (swaps, caps and floors). However in this case, the underlying is the price of a commodity rather than the interest rate. Piraeus Bank offers derivatives for an extensive range of commodities, such as oil and refined petroleum products, natural gas, metals and soft commodities.

  • Minimum nominal transaction €1,000,000 or the equivalent in foreign currency
  • Signing of Derivative Products Contract
  • Signing of MiFID agreement MiFID
  • Existence of relevant Limits extended by the Bank

Brief Description of Oil and Natural Gas Derivatives


Oil derivatives are mainly used by companies that wish to manage the price risk they run from using fuel in their productive and operational activities. The structure of these products is similar to the structure of interest rate risk management products (swaps, caps and floors). However in this case, the underlying is the price of a commodity rather than the interest rate. Commodity markets offer a wide range of underlyings that vary mainly with regard to the following features:



 1.     Refining stage
    • Crude Oil
    • Residual Fuel Oil
    • Gas Oil
    • Kerosene (Jet)
    • Diesel
    • Gasoline
    • Natural Gas
  2.      Type of Use

    • Aviation
    • Shipping
    • Land-based
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  3.      Extraction, Refinery and Receipt Site
    • North West Europe
    • Brent
    • West Texas (WTI)
    • Mediterranean
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Hedging products are usually benchmarked against price bulletins by independent issuers, such as Platt's and Reuters, or against prices of the underlying commodities in the major International Futures Exchanges. These include the London Metals Exchange (LME), the New York Board of Trade (NYBOT), the Chicago Board of Trade (CBOT) and the Chicago Mercantile Exchange (CME).

Brief Description of Metal and Agricultural Product Derivatives

Metal and agricultural product derivatives are mainly used by companies that wish to manage the price risk they run from using raw materials in their productive activities and by producers who want to lock in the price of their products. The structure of these products is similar to the structure of interest rate risk management products (swaps, caps and floors). However in this case, the underlying is the price of a commodity rather than the interest rate. The metal and agriculture derivative market offers a wide range of underlyings:


 1.     Base Metals
    • Aluminium
    • Copper
    • Zinc
    • Nickel
    • Lead
    • Tin
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  1.     Precious Metals
   
  • Gold
  • Silver
  • Platinum
  • Palladium
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  1.     Agriculture
   
  • Corn
  • Wheat
  • Soybeans
  • Sugar
  • Cotton
  • Coffee

Hedging products are usually benchmarked against the prices of the underlying commodities in the major International Futures Exchanges. These include the London Metals Exchange (LME), the New York Board of Trade (NYBOT), the Chicago Board of Trade (CBOT) and the Chicago Mercantile Exchange (CME).