Q&A – Standard Chartered Bank’s Afaq Khan
The sharia effect
End-users and producers looking to hedge their commercial risks usually use simple forward contracts to lock in the prices of the assets, foreign exchange and shipping rates.
However, the increased financialisation of commodities – the securitisation of commodity-linked instruments for investment rather than as a risk management tool – is said to have dramatically altered price movements, particularly in the oil markets, where commodity derivative contracts are shorted on the secondary markets
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