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Quantitative Finance · Glossary

What is Processing-spread trade?

Definition 21.1 Strategies II: Volatility, Relative Value, Macro and the Bank Desks · Chapter 21 — Commodity Spreads

A processing-spread trade is a position in an input commodity against the outputs made from it, in the ratio the process yields (crude against gasoline and diesel, gas against power at a heat rate, soybeans against meal and oil), that profits from changes in the processing margin rather than in the commodities’ price level.

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