Commodity derivative with special reference to Mcxindex

The trading in commodities was started with the first transaction that took place between two individuals. We can relate this to the ancient method of trading i.e., BARTER SYSTEM. This method faced the initial hiccups due to the problems like: store of value, medium of exchange, deferred payment, measure of wealth etc. This led to the invention of MONEY. As the market started to expand, the problem of scarcity piled up. The farmers/traders then felt the need to protect themselves against the fluctuations in the price for their produce. In the ancient times, the commodities traded were – the Agricultural Produce, which was exposed to higher risk i.e., the natural calamities and had to face the price uncertainty. It was certain that during the scarcity, the farmer, realized higher prices and during the oversupply he had to loose his profitability. On the other hand, the trader had to pay higher price during the scarcity and vice versa. It was at this time that both joined hands and entered into a contract for the trade i.e., delivery of the produce after the harvest, for a price decided earlier. By this both had reduced the future uncertainty. In this paper an attempt has been made to track the volatility analysis of some commodity derivatives on the basis of empirical finding of 4 years future prices of select commodities: -Gold& Silver. A volatility analysis of these two precious metal commodity have been carried out in this paper.