Question: a) Discuss the risks associated with derivative trading. b) Define and explain the terms Backwardation and Contango in relation to commodities futures market. c) Imagine

a) Discuss the risks associated with derivative trading.

b) Define and explain the terms Backwardation and Contango in relation to commodities futures market.

c) Imagine that you produce consumer products using oil-based chemicals as inputs. Suppose you purchase your oil from Russia and pay in Russian ruble. You are concerned that the appreciation in the ruble will affect your profitability. How would you use forward contracts to hedge the risk of your oil purchases?

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