Business, Management and Accounting
3 years ago

Physical delivery beats cash settlement for futures contracts, stabilizing commodity prices.

SSRN Electronic Journal
Exploring The Effect of Physical Delivery verses Cash Settled Futures Contracts with the Prospective of Obligatory Delivery in Islamic Contract of Sales
Farzan Adil, Danish Ahmed Siddiqui

Paper Summary

Physical delivery is more reliable than cash settlement for futures contracts involving gold, rice, wheat, and sugar. The study found that physical delivery reduces volatility in spot and futures prices compared to cash settlement. This method helps balance supply and demand in the market, preventing price declines and providing social benefits.

Related papers

Economics, Econometrics and Finance
3 years ago

Revolutionizing Risk Management: The Rise of Commodity Futures Trading

Oil Price Shocks
1 view
Economics, Econometrics and Finance
8 years ago

Futures Markets Reduce Price Volatility, Stabilizing Potato Market

Oil Price Shocks
Macroeconomic Analysis
Financial Volatility
1 view
Economics, Econometrics and Finance
8 years ago

Futures dominate price discovery for oriented strand board in forest product market.

Real Options
Carbon Sequestration
Oil Price Shocks