This paper discusses issues around measuring and modelling commodity-related exposures for manufacturers who are trying to obtain favorable hedge accounting treatment under
FAS 133 or IAS 39 for commodity hedges of their commodity purchases for production. Unlike with interest rate hedging, commodities do not have a benchmark interest rate and the core commodity component cannot be isolated and hedged — only the finished product or part. Analytical and statistical techniques are required to model the commodity exposure; these can also be useful risk management techniques for other risks.