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Archive » May 2020 » Etc products and investors’ risk: Covid-19 oil price fall and delisting

Etc products and investors’ risk: Covid-19 oil price fall and delisting

Fabrizio Crespi, Andrea Paltrinieri, Domenicantonio De Giorgio
May 2020 - n. 5
Keywords: Exchange-Traded Commodities, Exchange- Traded Funds, contango, backwardation, delisting, petrolio
Jel codes: G10, G13

Our work is aimed at investigating a little-scrutinized source of risk in the domain of Exchange-Traded Commodities (Etc): the delisting risk. The lockdown measures adopted in response to the Covid-19 pandemic have triggered a sharp contraction in the demand for commodities, knocking-down futures prices up to the point to determine negative prices for the April 2020 futures contract for the Wti Crude Oil. Within such an environment, we focus on the features of the WisdomTree Wti Crude Oil 3x Daily Leveraged Etc, which was delisted in response to a 30% fall of its Reference Index. Its complexity – and that of other such Etcs – would suggest that only those investors fully aware of the risks involved should be allowed to invest into Etcs, with clear policy implications.

 

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