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Self-liquidating is a term used in finance and trading to describe a transaction or investment that generates sufficient cash flow to repay or justify the initial capital outlay. In the context of energy commodities trading, this term can refer to a financing arrangement where the sale proceeds of the commodity are used to pay off the loan taken to produce or purchase the commodity. The concept means that the investment ‘liquidates itself’ from its own revenues or by saving an equivalent in expenses, without the need for external funding sources.

For example, if a company takes out a loan to purchase oil, and then sells the oil at a profit, the revenue generated from the sale can be used to pay off the original loan and any associated interest or financing costs. This is considered a self-liquidating transaction because the company does not need to dip into other sources of funds to close the loan.

The self-liquidating nature of an investment or transaction can reduce financial risk, as the loan repayment depends on the performance of the investment itself rather than unrelated revenue streams or external economic factors. In energy trading, self-liquidating instruments are favorable in volatile markets as they offer a degree of protection against price fluctuations.

For more information about self-liquidating transactions or investments, you can visit the following websites:

1. Investopedia – This leading financial education website provides definitions and explanations of various financial terms and concepts, including self-liquidating loans.

2. Corporate Finance Institute (CFI) – CFI offers online financial modeling and valuation courses, and their website includes a vast library of articles on financial terminology and practices.

Please note that while these URLs are active at the time of writing, web content can change over time. It is always a good practice to verify the availability of web pages.

This A.I.-generated glossary is intended to provide a convenient means to understand terminology used on this website in the context of physical commodities trading. Some terms may have alternative and/or expanded definitions that may not be relevant here and thus not included. Sources provided are for reference and not intended to be an endorsement of the broader content on that website. Suggestions, questions, or corrections can be provided in the comment box on definition pages.