The Chicago Mercantile Exchange (CME) is a global derivatives marketplace offering futures and options contracts for commodities, interest rates, stock indexes, foreign exchange, and more. It serves as a key platform for risk management in financial markets.
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CME was founded in 1898 originally as the 'Chicago Butter and Egg Board'.
It is one of the largest futures exchanges in the world by trading volume.
The CME allows traders to hedge against commodity price risks through standardized contracts.
Key products traded on CME include agricultural products like wheat and corn, energy products like crude oil, and financial instruments like Treasury bonds.
CME Group also includes other exchanges such as the New York Mercantile Exchange (NYMEX) and the Commodity Exchange Inc. (COMEX).
Review Questions
What types of contracts can be traded on the Chicago Mercantile Exchange?
How does the CME help traders manage commodity price risks?
Name two major commodities or financial instruments traded on the CME.
Related terms
Futures Contract: A standardized legal agreement to buy or sell a particular commodity or financial instrument at a predetermined price at a specified time in the future.
Options Contract: A contract that grants the buyer the right, but not the obligation, to buy or sell an asset at a specified price before a certain date.
Hedging: A risk management strategy used to offset potential losses/gains that may be incurred by an investment.