finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fina ...

, an exchange of futures for physicals (EFP) is a transaction between two parties in which a

futures contract In finance, a futures contract (sometimes called a futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The asset ...

on a

commodity In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a comm ...

is exchanged for the actual physical good. This transaction involves a privately negotiated exchange of a futures position for a corresponding position in the underlying physical. An EFP is similar to an EFS, except that it involves a physical contract rather than a cash swap contract. An EFP gives the market participants the ability to manage risk.

References

Futures markets Derivatives (finance) {{finance-stub