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Cross Commodity Swap


A commodity swap that links the price of one commodity to that of another. For example, electricity rate swaps can be used to create “exotic” electric rates, such as electric rates which fluctuate with aluminum prices, steel prices or natural gas prices. Such a swap is particularly useful for firms (especially industrial companies) whose profits and ability to pay for electricity are closely linked to the price of another commodity.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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