“The Volatile Dynamics of Commodity Future Trading on Spot Prices”

Abstract

In this paper, we have discussed about volatile dynamics of commodity future trading and Spot prices. We explain how prices, rates of production, and inventory levels are interrelated and what is theimpact of Commodity Future Trading on Spot Prices Variation with special reference to Indian Agriculture. We also explain the role and behavior of commodity futures markets, and the relationship between spot prices and futures prices. We have taken example of with data for the Agriculture Commodities - Dhaniya, Jeera. This study also assess whether spot market participants can successfully use future positions to minimize spot market price risk and analyse the impact of Commodity Future Trading on Spot Prices Variation in India. This study would glance into some uniqueness of future trading platform in futures market in in order to review whether prices indicate efficient functioning of the market or otherwise and through light on inter-relationship between spot and futures commodity markets in India. In this study we have used the regression analyses to find out the impact of future prices on the spot prices of the agricultural commodities and impact of future trading volume on GDP growth rate.