Advanced Modelling and Analysis of Commodity Derivatives

London Financial Studies

Short course

In London and New York (USA)

£ 3,885 + VAT

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Description

  • Duration

    3 Days

  • Start date

    Different dates available

This 3 day intensive programme reviews the best practice in quantitative modelling for commodity derivatives. The emphasis is on the pricing, hedging, and risk management of energy and metals derivatives and their price behaviour within the commodities market.

Excel based practical exercises will cover:

Stochastic modelling of commodities markets
Analyzing volatility in the commodities markets
Structuring and pricing commodity derivatives
Monte Carlo simulations and pricing methodologies
Pricing exotic commodity derivatives

Facilities

Location

Start date

London
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34 Curlew Street, se12nd

Start date

Different dates availableEnrolment now open
New York (USA)
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Start date

Different dates availableEnrolment now open

About this course

Commodity derivatives professionals
Quantitative analysts
Risk managers
Structurers
IT professionals
Energy company risk managers
Insurance companies

The course assumes a working knowledge of the commodities markets and commodity derivatives as well as strong Excel skills. Basic algorithms in VBA will be used but prior knowledge is not essential.

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Reviews

This centre's achievements

2016

All courses are up to date

The average rating is higher than 3.7

More than 50 reviews in the last 12 months

This centre has featured on Emagister for 16 years

Subjects

  • Derivatives
  • Commodities
  • Options
  • Risk
  • IT risk
  • Market
  • Physical Optionality
  • Risk Management
  • Proxy hedging
  • Commodities Markets
  • Gamma
  • Theta
  • Stochastic
  • Financial markets
  • Commodity Derivatives
  • Delta Hedging
  • Correlation

Teachers and trainers (2)

Peter Leoni

Peter Leoni

Teacher

Dr Peter Leoni graduated with a PhD in mathematical physics and worked for KBC Asset Management as a risk manager modelling equity and interest rate derivatives. He then moved to ING as a front office quant at the exotic equity derivatives desk; and before the credit crunch hit, decided to change his career path towards commodities, focusing on energy. Dr Leoni spent 4 years in the trading unit of GDF Suez in Brussels and is currently the director of trading for the London/Geneva office of a privately owned trading firm.

Wim Schoutens

Wim Schoutens

Teacher

Prof Wim Schoutens is Research Professor in financial engineering in the Department of Mathematics at the Catholic University of Leuven, Belgium. Prof Schoutens is also the author of "Lévy Processes in Finance: Pricing Financial Derivatives" and co-editor of "Exotic Option Pricing and Advanced Lévy Models" both published by Wiley Finance. His research interests cover all areas of financial mathematics, with recent publications on jump driven credit models and equity models, model risks, hedging of exotics and multivariate financial modelling.

Course programme

Day One

Fundamentals of Commodity Markets
  • The basics of commodity markets
  • Forwards, futures and swaps
  • Cost of carry
  • Seasonality in energy prices
The Forward Market
  • Physical versus Financial markets
  • Contango and backwardation
  • Constructing the forward curve
  • Spot versus curve contracts
Workshop: The Electricity and Gas Forward
  • CurveCascading contracts
  • Shaping the curve
Commodity Derivatives
  • General introduction to derivatives
  • Commodity futures options
  • Commodity swaps
  • Commodity structured products
  • Physical/Embedded optionality
Basic Commodity Models
  • Overview of Black Scholes and Black's (1976) model
  • Volatility
  • Mean reversion
  • Jump diffusion models
Workshop: Commodities Modeling
  • Implementing Black Scholes in the commodity markets pricing of commodities structured products

Day Two

Analysing Volatility in the Commodity Markets
  • Estimating historic volatility
  • Implied volatility for commodity derivatives
  • Volatility skews and smiles and term structure
  • Stochastic volatility models
Workshop: Volatility

Estimating volatility of commodity markets

Monte Carlo Methods for Pricing Commodity Derivatives
  • The basic principles of Monte Carlo simulation
  • Implementing a Monte Carlo pricing engine
  • Improving Monte Carlo methods
  • Exotic commodity derivatives
Workshop: Univariate Monte Carlo Methods
  • Pricing of exotic options using Monte Carlo
Risk Management and Hedging in the Commodity Markets
  • The Greeks
  • Delta hedging
  • The Gamma Theta trade off
  • Delta Gamma Vega Hedging
Correlation in Commodities Markets
  • The basics of correlation
  • Spread options and other correlation sensitive derivatives
  • Margrabe's model
  • Kirk's approximation
  • Monte Carlo simulation of correlated commodities
Workshop: Pricing of Spark Spread Option
  • Implementation of multivariate monte carlo method
  • Pricing of a spark spread option
Day Three

Advanced Commodities Models
  • Implied distribution
  • Truncated distributions
  • Vanna Volga model
  • SABR
Workshop: The Vanna Volga Model
  • Implement Vanna Volga model
FX Component in Commodities
  • Quanto and compo forwards
  • Quanto and compo options
  • Quanto pricing
Advanced Risk Management
  • Proxy hedging
  • Uncertainty versus volatility
  • Correlation hedging
  • Quanto hedging
Modeling Physical Optionality
Locational optionality
  • Timing optionality
  • Shipping
  • Storage
Workshop: Monetizing Options

Delta hedging OTM options

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Advanced Modelling and Analysis of Commodity Derivatives

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