Agricultural Finance: From Crops to Land, Water and Infrastructure

Glossary

Acre

0.4046 hectare

American option

An option that can be exercised any day prior to or at maturity. Most exchange-traded options are American. A standard corn Futures option on the CME for instance is written on a Future contract of a specific maturity. The option exercise results in a Future market position

Asian option

This option can only be exercised at maturity but the underlying is an average of the spot (or specific Future) over the lifetime (or a subinterval of it) of the option

Ask

The level at which sellers are willing to sell

At-the-money

An option whose strike is the current market price of the underlying

Backwardation

A forward curve is backwardated when forward prices decrease with the maturity of the contract

Barge

A small vessel used to carry commodities along a river or a canal; barges vary in capacity, usually from 1000 to 5000 tonnes

Basis risk

The risk that a Future contract used as a hedge will not move in line with the underlying exposure. Basis risk may be related to a location, quality, type or calendar gap

Bill of lading (B/L)

A legal document issued by a carrier or its agent to the shipper as a contract of carriage of goods. It is also a receipt for cargo accepted for transportation

Book

The set of spot and derivative positions held by a trader or a desk

Bunker fuel

A crude oil distillate used in vessels

Bushel

There are 60 pounds in a bushel. CBOT corn and wheat Futures involve 5000 bushels of the cereal

Calendar spreads

These are options on the price ...