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What Is Commodity Price Risk? Commodity price risk is the possibility that commodity price changes will cause financial losses for either commodity buyers or producers. Buyers face the risk that commodity prices will be higher than expected. Many furniture manufacturers must buy wood, for example, so higher wood prices increase the cost of making furniture

What Is a Commodity-Product Spread? The commodity-product spread is the difference between the price of a raw material commodity and the price of a finished product created from that commodity. The commodity-product spread forms the basis of some favorite trades in the futures market. To trade on the spread, an investor typically combines a long position

What Is the Commodity Selection Index (CSI)? The commodity selection index (CSI) is a technical momentum indicator that attempts to identify which commodities are the most suitable for short-term trading. The larger the CSI value, the stronger the trend and volatility characteristics associated with that particular asset. This indicator should only be used by traders

What Is a Commodity Swap? A commodity swap is a type of derivative contract where two parties agree to exchange cash flows dependent on the price of an underlying commodity. A commodity swap is usually used to hedge against price swings in the market for a commodity, such as oil and livestock. Commodity swaps allow

What Is a Commodity Trader? A commodity trader is an individual or business that invests in physical substances like oil, gold, or agricultural products. Daily buying and selling are driven by expected economic trends or commodity market opportunities. Commodity markets typically trade in the primary economic sector and most commodity trading involves the purchase and

What Is Common Equity Tier 1 (CET1)? Common Equity Tier 1 (CET1) is a component of Tier 1 capital that is primarily common stock held by a bank or other financial institution. CET1 is a capital measure that was introduced in 2014 as a precautionary way to protect the economy from a financial crisis, largely in

What Is Common Law? Common law is a body of unwritten laws based on legal precedents established by the courts. Common law influences the decision-making process in unusual cases where the outcome cannot be determined based on existing statutes or written rules of law. The U.S. common-law system evolved from a British tradition that spread to North America

What Is a Common Size Balance Sheet? A common size balance sheet is a balance sheet that displays both the numeric value and relative percentage for total assets, total liabilities, and equity accounts. Common size balance sheets are used by internal and external analysts and are not a reporting requirement of generally accepted accounting principles

What Is a Common Size Financial Statement? A common size financial statement displays items as a percentage of a common base figure, total sales revenue, for example. This type of financial statement allows for easy analysis between companies, or between periods, for the same company. However, if the companies use different accounting methods, any comparison

What Is a Common Size Income Statement? A common size income statement is an income statement in which each line item is expressed as a percentage of the value of revenue or sales. It is used for vertical analysis, in which each line item in a financial statement is represented as a percentage of a