Commodities And Commodity Derivatives

Commodities & Commodity Derivatives

Course Outline:
The current explosion of activity in commodity markets - expressed by the amount of capital flowing into this asset class and the remarkable growth of hybrids, structured notes and commodities indexes - makes this course essential for all those needing a thorough and detailed understanding of both spot and derivative transactions. The programme will cover fundamental issues such as volume risk, mean-reversion, the forward curve, and the theory of storage. Plain-vanilla and exotic options on commodities will be analysed, as well as a real options approach to energy physical assets. Lastly, different ways of investing in commodities will be presented and discussed, as well as the virtues of holding commodity baskets to diversify a portfolio and hedge against inflation.
All delegates will receive a copy of Professor Geman's book, Commodities and Commodity Derivatives: Modelling and Pricing for Agriculturals, Metals and Energy.

Who The Course is For:
Commodity traders Hedge fund managers Investment bankers Energy company risk managers Insurance companies   Prior Knowledge Some basic knowledge of finance will be required. All fundamentals on commodities will be reviewed.  

Course Programme*
Day One
Fundamentals of Spot and Forwards / Futures Commodity Markets


Instruments and Commodity Exchanges
Commodity Spot Markets: the importance of liquid indexes to create derivatives
Shipping and freight as a new commodity:Spot and Freight Forward Agreements (FFAs)
Futures contracts and Price discovery
Theory of Storage and Convenience Yield
The forward curve as a key element when trading commodities
Carry relationship and shape of the forward curve

Understanding Base Metals


The LME rules
Delivery and Warehouse Stocks
The products:
- aluminium
- the rally of copper and zinc
- nickel


The Mechanics of Precious Metals


Gold and the London Bullion Market
Precious metals derivatives and ETFs
Uranium and Uranium Futures

Energy Markets


The Nymex and the ICE
Crude Oil
Natural Gas and LNG
Emission, CO2 and Electricity power stack

Case Study: Modelling the dynamics of the forward curve: the case of oil
Day Two
Commodity Options


Dynamics of Commodity Spot Prices
Seasonality as a key feature in energy and Agricultural commodities. The example of calendar Futures spreads
Agricultural commodities:
- Relationship between inventory and price volatility
- The corn and sugar rally

The current bull cycle in energy: mean-reversion or persistent upward trend in energy commodity price processes?
Modelling energy commodity prices: reduced-form versus structural versus hybrid models
Incorporating spikes in the trajectories for electricity and other energy prices
Plain-Vanilla Options on Commodity Spot and Futures Prices: the volatility smile/skew
Exchange Options for Energy Commodities
Darkspreads, sparkspreads and crackspread options
Introducing emission costs in sparkspreads
Asian and forward start options
Swing and volumetric options: the different approaches

Case Study: Investing in Commodities:
     - The major Commodity Indexes
     - How to choose the weights, maturity and rebalancing rule when creating a new index
* Subject to change. Please contact course provider for more details.

This program is eligible for 16 Continuing Education credit hours from the CFA Institute. If you are a CFA Institute member, CE credit for your participation in this program will be automatically recorded in your CE Diary.