Noble Group, Its Risk And Its Circularity With The Energy Commodity Prices

Noble Group, Its Risk And Its Circularity With The Energy Commodity Prices by Navigating the Commodity Markets with Freight and Spreads

The link between lending, credit, liquidity and price is a less-understood aspect of commodity trading.

It is fundamentally wrong to compare lending risks in commodities with lending risks in any other businesses.

Bank lending is modeled on negative skew (frequent small gains and infrequent large losses) while the shape of the normal distribution in commodities has positive skew, the opposite.

A bank underwriting loans on commodities to a large pool of customers and collects the interest and fees until the day one very large customer defaults on their loans (think of the big E, Enron Corp) and everything they’ve earned...