Definition: Commodity-linked derivatives

Category: External debt - IMF

Derivatives whose value derives from the price of a commodity. These include: 

• Commodity future—traded on an organized exchange, in which counterparties commit to buy or sell a specified amount of a commodity at an agreed contract price on a specified date; 

• Commodity option—gives the purchaser the right but not the obligation to purchase (call) or sell (put) a specified amount of a commodity at an agreed contract price on or before a specified date; and 

• Commodity swap—a swap of two payment streams, where one represents a currently prevailing spot price and the other an agreed contract price for a specified quantity and quality of a specified commodity. 

Net cash settlements are usually made. http://ec.europa.eu/eurostat/ramon/statmanuals/files/external_debt_guide_2003_EN.pdf#page=227