Crude oil is today sold under in contract markets, spot markets, and on futures exchanges. Provide...

Crude oil is today sold under in contract markets, spot markets, and on futures exchanges. Provide an example of the type of information that is revealed in market prices

Expert Solution

Crude oil can be bought and sold in different market situations like spot market, future market and contract market. People can invest in crude oil as portfolio investment and speculative assets.
Under spot market , crude oil can be bought and sold at current market prices. In spot transactions, immediate transfer of fund takes places. In the case of future exchange, both parties can engage in a future contract at a predetermined date and price. The future price of crude may be lower, higher or equal to spot prices. The future prices of crude oil may vary depends on several internal and external factors. Thus the parties can engage in contracts to avoid the uncertainty of lower or higher prices. The crude oil prices are subject to fluctuations and parties can hedge risk with future contracts.

Rahul Sunny answered 2 years ago

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