• Commodity Forward

    A product that makes it possible to hedge the risk of changing commodity market prices.

Hedging

Enjoy protection against significant changes in commodity prices.

Variable

Select a product modification that suits your needs.

Simple

Negotiate transactions via telephone with our Sales dealers.

Transparent

Keep track of all your trades thanks to confirmations.

Why KB?

Trade individually

Negotiate each transaction with Sales dealer.

Let us help

Contact the toll-free KB Info Line at 800 521 521 anytime.

Trade professionally

A team of KB specialists will propose suitable hedging strategy and provide assistance.

How to get this product?

Select a branch, leave your contact information – we will call you back.

At a branch

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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

Commodity forward

You might also like to know

  • Available product modifications:
    • Quanto:
      • The underlying commodity is listed in another currency – different from the settlement currency
    • Basket:
      • 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

Risk

  • 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)