Investing in financial assets was for a long time an exclusive and covered business which was reserved to institutional and selected wealthy investors. The introduction of the internet and direct brokerage made transaction costs falling and hence investment became available to the broad public. While the investment volume in stock and bond markets grew steadily in America over the last 20 and in Europe over the last 10 years, commodities did not play a major role in financial investment owing their low prices and in-transparency. But the situation has changed over the past 5 years. Due to low performance of stocks and bonds, the time period from 2000 to 2003 boosted the growth of financial commodity markets in particular. There are two dimensions which foster the development: hedging and investing. The diploma thesis ?Commodities as an Asset Class? aims to highlight commodities from the investment point of view. After introducing the functionality of the market, commodities characteristics are put into mathematical forms. Although the underlying trading vehicle for commodities are futures contracts, i.e. financial derivatives, their price cannot be valued following general arbitrage arguments. Commodities are assumption goods and therefore, it is possible that inventories are eaten up in times of scarcity yielding into the impossibility to create a hedging portfolio that gives the fair price of the financial derivative. Moreover, the price of commodities is driven by supply and demand. This has to be taken into consideration and can also be seen in the statistical properties of commodity returns. The thesis is closed with a portfolio allocation analysis. It shows that the better risk and return profile, generated by adding commodities to a stock and bond portfolio, is independent of the assumption of extraordinary high commodity returns like the ones realized over the last years.     «

Investing in financial assets was for a long time an exclusive and covered business which was reserved to institutional and selected wealthy investors. The introduction of the internet and direct brokerage made transaction costs falling and hence investment became available to the broad public. While the investment volume in stock and bond markets grew steadily in America over the last 20 and in Europe over the last 10 years, commodities did not play a major role in financial investment owing th...     »