The assignment deals with the question whether derivatives harm society as a whole. The central issue is a possible impact of derivatives prices on present prices for agricultural commodities. In order to provide the necessary background knowledge, the terms derivatives, varieties, valuation, market participants and principles of operation are explained. After recognising theoretical knowledge and the results of different studies, it turns out that there is no empirical evidence for plausible harming impacts of over speculating index investors. Further studies have to be conducted in future in order to provide a reliable proof for policy makers.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Derivatives Defined
- Types of Derivatives
- Forwards
- Futures
- Conceptual Insights and Valuation
- Main Mechanisms of a Futures
- Valuation Concept
- Relationship between Spot Markets and Futures Markets
- Markets, Participants and their Intentions
- Derivatives on Agricultural Markets and their Impacts
- Market Characteristics
- Analysis of the Link to Increased Food Prices
- Conclusion
- Result and Critical Appraisal
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This home assignment aims to explore the potential impact of derivatives on society, specifically focusing on their influence on agricultural commodity prices. The paper delves into the nature of derivatives, their types, valuation methods, and the role of market participants. It analyzes the impact of derivatives on agricultural markets and examines whether they contribute to increased food prices. Key themes and objectives include:- Defining derivatives and explaining their different types.
- Exploring the valuation and operation of derivatives, particularly futures contracts.
- Analyzing the relationship between spot and futures markets.
- Examining the role of various market participants and their intentions.
- Investigating the impact of derivatives on agricultural markets and their potential contribution to food price inflation.
Zusammenfassung der Kapitel (Chapter Summaries)
- Introduction: This introductory chapter sets the stage for the investigation, outlining the central question of whether derivatives have a negative impact on society, with a specific focus on their effect on agricultural commodity prices.
- Derivatives Defined: This chapter provides a definition of derivatives and explores their fundamental characteristics, laying the groundwork for a deeper understanding of their role in financial markets.
- Types of Derivatives: This section focuses on two key types of derivatives: forwards and futures contracts. It outlines their respective features and how they function in practice.
- Conceptual Insights and Valuation: This chapter dives into the core mechanisms of futures contracts, exploring their valuation methods and how they relate to spot market prices.
- Markets, Participants and their Intentions: This section examines the various players operating within derivatives markets, analyzing their individual motivations and how their actions influence market dynamics.
- Derivatives on Agricultural Markets and their Impacts: This chapter delves into the specific impact of derivatives on agricultural markets, focusing on market characteristics and investigating the link between derivatives and potential increases in food prices.
- Result and Critical Appraisal: This chapter summarizes the findings of the analysis, offering a critical appraisal of the evidence gathered and drawing conclusions about the potential impact of derivatives on society.
Schlüsselwörter (Keywords)
This work examines the impact of derivatives on society, particularly in the context of agricultural commodities. Key concepts explored include derivatives, forwards, futures, valuation, market participants, agricultural markets, food prices, and their potential connection to index investors and speculation.
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- Martin Wendt (Author), 2014, Derivatives on Agricultural Commodities. Harm or Charm for the World's Society, Munich, GRIN Verlag, https://www.grin.com/document/274334
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