Traders or Commodity Finance Banks Part IX- Self Financing of Trade Desks.

Behind each of them, remember there is a Bank.

Traders or Commodity Finance Banks ? Part V- Wrong-Way Risk in Commodity Trade

They neutralize the commodity price delta, find a satisfactory counterparty for the banks who cover the payment risk from the time encompassing the loading, transportation, delivery and payment of the commodity.

This rate (R) at which a trader move a “commodity in time and space” equals the rate (r*) at which banks finance the commodity trade plus m, a margin covering the costs and a profit for the transaction.

When R is ≤ r*+m, the traders doesn’t trade or alternatively may lend at r* to another counterparty.