Commodities and Commodity Markets - Trading, Investing and Risk Management

Duration:
3 days
Location:
Prague, NH Hotel Prague
  • Commodity Instruments and their Applications
  • The Agricultural/Softs Complex
  • Metal Markets and Price Drivers
  • Traded Commodities and Market Indices
  • Commodity Markets, Pricing and Models
  • Trading and Hedging Strategies
  • Commodity Investing and Portfolio Diversification
  • Risk Management and Compliance
Course Description

This course is designed to provide participants with a thorough introduction to soft commodity and metal markets, products, pricing, trading, hedging and risk management. It will cover the fundamental and technical drivers for each market as well as insight into trading strategies and their associated instruments, particularly the use of derivatives. Participants will gain a thorough understanding of the workings of the commodity markets.

Learning Objectives

Participants will gain a broad understanding of the soft commodity and metals markets including supply and demand factors and price determinants together with trading methods and risk management of these markets.

Who Should Attend?

The course is suitable for all members of the commodity and financial community. This will include Professionals from Banking, Asset Management, Commodity industry, Commercial Commodity Users, Trade Finance, Trading, Brokers, Risk and Treasury Professionals. In addition it will be relevant to Executives and Senior Management from many organisations.
All who work within or wish to know more about the Commodities Industry will gain valuable insights, knowledge and skills from this course.

09.00 - 09.15 Welcome and Introduction

The Commodity Markets

Session 1: Introduction to Commodities

  • Introduction
    • Definition of commodities
    • The role of commodities
    • Development of new commodity markets
  • Players in the Commodity Markets
    • The role played by:
    • Producers
    • Consumers
    • Cartels
    • Governments
    • Regulators
  • Market Participants
    The role played by:
    • Hedgers
    • Speculators
    • Arbitrageurs

Session 2: Soft Commodities & Markets

  • Agricultural, Livestock and Pork
    Overview of the following commodities, production, price drivers and uses
    • Cocoa
    • Coffee
    • Rubber
    • Palm Oil
    • Soy Beans, Oil, Meal, Crush Spreads
    • Wheat , Corn
    • Sugar
    • OJ
    • Rapeseed
    • Rice
    • Tobacco
    • Live and feeder cattle, pork bellies
  • Biofuels
    Overview of the following commodities, production price drivers and uses
    • Bio-Fuels: Bio Ethanol, Bio Diesel
  • Transport
    Overview of the following commodities: price drivers
    • Freight and Weather derivatives

Session 3: Metal Markets

  • Base Metals & Plastics
    The production and use of the following metals:
    • Copper, Lead, Tin, Zinc, Aluminium
    • Steel
    • Iron Ore
    • Plastics
    • Importance of London Metal Exchange(LME)
    • Metals Price Drivers
  • Precious Metals and Diamond
    The production and use of the following:
    • Gold
    • Silver
    • Platinum
    • Diamond
    • New Markets, Uranium, Rare Earths
    • Price Drivers

Session 4: Commodity Markets and Exchanges

The development and use of exchanges.

  • Futures, Options, Delivery: Examples from markets above.
  • The Clearing House – its pivotal role
  • EFP and Swaps Clearing – recent innovations
  • Dodd Frank Implications – who can use swaps
  • Major Commodity Exchanges – open outcry and electronic (Comex, Globex, ICE, LME, Baltic Exchange)
  • Developments and new exchanges.

Day Two

Commodity Pricing and Trading

Session 5: Commodity Pricing

  • The importance of basis
  • The forward price curve
  • Factors affecting commodity pricing
  • Supply and demand
  • Commodity Price Processes
  • Backwardation and Contango
  • Storage factors
  • Price Volatility
  • Seasonal factors affecting prices with examples
  • Commodity prices and interest rates
  • Commodity models – examples of GBM, mean reversion, jump diffusion

Session 6: Commodity Trading Part(1) - Fundamentals

  • Spot - Forward Relationship
  • Convenience Yield
  • Derivatives, their uses with examples.
  • Swaps and their uses with examples
  • Leasing and Repos
  • Warrants: use in the metals market
  • Commodity Indices and their application
  • Exchange Traded Funds (ETF’s)
  • Case studies and exercises

Session 7: Commodity Trading Part(2) - Strategies

  • Hedging Exposure for producers and consumers : Forward / Future, Swap, Options, caps and collars.
  • Spread Trading
  • Spot and Forward trading strategies
  • Swap trading strategies
  • Spreads
  • Opportunity and arbitrage
  • Case studies and exercises

Session 8: Commodity Trading Part(3) - Options

  • Option trading: Trading Volatility
  • Skew and Kurtosis
  • Option trading strategies
  • Day trading Commodities.
  • Case studies and exercises

Day Three

Commodity Asset Management & Risk Management

Session 9: Commodity Asset Management

  • Commodities as an asset class
  • Major Players
  • Benefits: Portfolio diversification, inflation hedge
  • Methods of Investing: Futures, ETF’s and ETC’s
  • Hedge against the US$
  • Spread Trading in a portfolio
  • Spot and Forward trading strategies
  • Swap trading strategies
  • Option trading
  • Sensitivity of a portfolio

Session 10: Commodity Risk Management (1)

  • Commodities are different!
  • Basis, market, credit, operational risks
  • Liquidity and price risks
  • Event risk
  • Documentary risk
  • Political risk and others
  • Risk mitigation

Session 11: Commodity Risk Management (2)

  • Risk Models
  • Stress testing
  • VaR and its limitations
  • Simulated price movements
  • Front Month Equivalents (FME)
  • Other risk metrics
  • Commodity disasters with case studies

Session 12: The Global Outlook for Commodities

  • Global Trends
  • New developments
  • Market Forecast’s & Predictions

Evaluation and Termination of the Course

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