DEFINITION of 'Commoditization'

1. A situation when illiquid financial contracts are changed or modified in a way that promotes trading and results in a more liquid market.

2. Making a product into a commodity.

BREAKING DOWN 'Commoditization'

1. While many consider this sort of adjustment worthwhile, some view commoditization as a cause of price fluctuations.

2. When a product becomes indistinguishable from others like it and consumers buy on price alone, it becomes a commodity.

  1. Liquidity

    The degree to which an asset or security can be quickly bought ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with ...
  3. Illiquid

    The state of a security or other asset that cannot easily be ...
  4. Capital Markets

    Capital markets are markets for buying and selling equity and ...
  5. Implied Volatility - IV

    The estimated volatility of a security's price.
  6. Plain Vanilla

    The most basic or standard version of a financial instrument, ...
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