Question

Explain difference between commodity derivative and financial derivative

Answer 1

Answer:

The basic concept of a derivative contract remains the same whether the underlying happens to be a commodity or a financial asset. ... On the other hand, due to the bulky nature and physically existence of the underlying assets, physical settlement in commodity derivatives creates the need for warehousing.

Answer 2

Answer:

☑ The basic concept of a derivative contract remains the same whether the underlying happens to be a commodity or a financial asset. ... On the other hand, due to the bulky nature and physically existence of the underlying assets, physical settlement in commodity derivatives creates the need for warehousing