Definition of Commodity Risk

Financial Terms Beginning with C

What is Commodity Risk

Commodity risk is the risk or probability for loss due to the fluctuation in prices of commodities. Commodity buyers face the risk that the commodity price will be higher than expected, which may contribute to an economic loss.

Commodity producers or sellers face the risk that the commodity price will be lower than expected. It is common for investors with significant commodity exposure to use commodity hedges or derivatives to offer a level of protection from uncertainties.

Glossary of Terms and Phrases

A financial dictionary or glossary is an essential tool to better understand the meaning of a specialized term or phrase. It would obviously make life much easier if everyone spoke the same language and used the same financial terms and phrases but that is not realistic.

We learn new languages to communicate with each other, transact business globally and to appreciate other cultures. Global finance is a specialized language that if understood and mastered, it will provide benefits that help to decrease risk and improve investment returns. Financial literacy is the foundation of developing good investment strategies and sound decision making.

Related Investment Terms

Equity Risk

Interest Rate Risk

Market Risk

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