Negotiate each transaction with Sales dealer.
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Contact the toll-free KB Info Line at 800 521 521 anytime.
A team of KB specialists will propose suitable hedging strategy and provide assistance.
Entrepreneurs and legal entities – domiciled in the Czech Republic and abroad.
About Commodity Forwards
- Method for hedging commodity price risk
- Forward price of a commodity is compared to the commodity closing price published in the period agreed upon on trade date – usually the end of a reference period
- Difference in prices for the agreed commodity quantity is paid by the party in disadvantageous position usually 2 to 5 working days after the end of the reference period
- Transaction settlement is always financial, no physicals are exchanged
Settlement for the given reference period: PA = NA * abs(CSP – P), where:
- PA – payment (settlement) amount
- NA – negotiated commodity amount
- CSP – cash settlement price
- P – agreed fixed price
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Available product modifications:
- The underlying commodity is listed in another currency – different from the settlement currency
- The underlying is a basket of several commodities
Deferred price fixing:
- The fixed price is not known on the day the transaction is negotiated
- The fixed price is determined on the basis of daily quoted averages over a specific future period
Transaction counterparties may agree to terminate commodity forwards early in the term
- If a commodity forward is terminated early, parties settle the market value in a single payment
- Any future liabilities thereby cease to exist
Important information for you
- Profit or loss from commodity transactions is affected by commodity price fluctuations
The client will incur loss if the commodity prices move against him during individual reference period – the client’s payment exceeds the amount to be paid by the bank
- In this case, the client pays a difference of the two payments to the bank
- In case the transaction was negotiated as a hedging instrument, the loss represents cost of hedging (hedging protects clients from significant commodity price fluctuations that could result in financial problems)