1. Prepaid swap (commodity):
Prepay for commodity delivery in next few periods. Based upon forward / term structure of interest rates and the price of commodity from futures market
2. normal swap:
Fixed payments for the long position, the short position bears interest rate risk etc.
If interest rate change in between, calculate new values accordingly..
The net of swap is no longer zero once we proceed in time: one side could be +ve net at any time
3.
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Forwards:
Storage costs can produce contango...
Lease rate: the amount of money a lender requires to lend a commodity
Seasonal production vs constant production..
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convenience yield: will produce opposite effect of storage costs
5-3-2 commodity / crack spread
Strip hedge:
Short stack hedge:
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