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A nation can use a commodity, such as gold, silver coins, sea shells or beads, as a basis for trade, or it can use paper bills. When paper bills are redeemable for a commodity, such as a bill that states that it can be returned for an ounce of silver, they can be considered "commodity money." However, money created by "fiat" is created whenever a nation's central bank decides to issue it, and it can not be turned in for a commodity. Most of the world's currency is "fiat money," declared as legal tender by the respective governments, despite having…
Commodities markets offer investors the chance to purchase contracts that diversify portfolios and help to limit risk. Although commodities, including items such as oil, precious metals and food products, can have volatile prices, commodity swaps allow participants to reduce other risks. Deregulation of financial institutions has made commodity swaps increasingly popular; business executives and other investors who understand the process can therefore gain a competitive advantage.
