Spreads, Financial Management

Spreads

The difference between two futures price is referred to as ‘spread'. For the same underlying good, if there are two different prices on two different expiration dates, the underlying spread is referred as ‘intra commodity' spread (also known as a ‘time spread'). If the spread is between two futures prices for two different but related commodities, such as corn oil futures and cottonseed oil futures, it is referred to as ‘inter commodity spread'. If the price difference is between two markets for the same commodity, it is known as ‘inter-market spread'. The spread relationships are significant due to the act of speculation. Theoretically, there should be no inter-market spread as the difference in rates is adjusted by the cost-of-carrying or transportation cost, but as discussed above, if the price difference is large enough and there is a seasonality of demand and supply, price differences may occur giving rise to inter-market spreads.

 

 

Posted Date: 9/10/2012 9:18:56 AM | Location : United States







Related Discussions:- Spreads, Assignment Help, Ask Question on Spreads, Get Answer, Expert's Help, Spreads Discussions

Write discussion on Spreads
Your posts are moderated
Related Questions
Lakespring Retirement Village is home to senior citizens who are fairly independent but need assistance with basic health care and occasional meals. Jill Thompson, a licensed beaut

Explain the terms- Stock and  Share Stock Ownership of a company represented by shares that are a claim on the company's earnings and assets. Share Unit of equity

Suppose that the Fed buys $1 million of bonds from the First National Bank. If the First National Bank and all other banks use the resulting increase in reserves to purchases bonds

Q. Yield curve - influence the rate of interest? The normal yield curve demonstrates that the yield required on debt increases in line with the term to maturity. One reason for

Insider Trading Insider trading refers to dealing in securities by persons who are privy to specific information of companies. This possession of confidential information gives

what are the arguments in favour of profit maximization?

Is it possible to make money in the stock market when the quotations are going down? What is credit sale? There are three simple moves to make money when prices are going down:

QUESTION (a) Describe briefly three methods of electronic payment. (b) (i) Explain briefly the term E-Billing. (ii) Outline three advantages of E-Billing. (c) Why is c

Balance Sheets   Peony Ltd. Aster Ltd. Assets:     Cash $     62,500 $

The ability of a firm to satisfy its debt obligations can be assessed using three sets of ratios: Short-term solvency ratios Capitalization