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Commodity Derivatives
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Course overview:
This course is being offered as a hybrid course with delegates able to attend in-person in London or virtually via Zoom. If you would like to book on to the virtual course, you can do so here
Effective commodity price risk management is a critical differentiator of business performance for any company producing, trading, consuming or using commodities as part of their manufacturing or distribution process. Price volatility and increasingly complex commodity markets are the main influencing factors and companies that proactively and efficiently manage their commodity price risk gain a competitive advantage over their peers especially when it comes to profit margin. Bankers, trade financiers and investors alike can also benefit from the vast risk appetite opportunities in commodities.
This practical training course has been designed to provide delegates with a comprehensive overview of the commodity derivatives markets, hedging strategies and risk management techniques to effectively manage commodity exposure.
The first part of the programme is an introduction to the main commodity asset classes, their market structures and the main players in the commodity markets. It also introduces the concepts of derivatives instruments used in commodity trading.
The second part of the programme focuses on how to manage commodity price exposure through hedging techniques using exchange traded and OTC derivatives. Drawing upon numerous examples, and through the use of industry-specific case studies and workshops, participants will learn several techniques for dealing with the scope and complexity of commodities trading and risk management. The course also explores the investment vehicles available for accessing commodity exposure and the financing options in the commodities sector, including: royalties and streaming; project finance; corporate facilities; trade and export finance.
Practical learning:
The training will comprise a combination of classroom-based teaching combined with real-life case studies and workshops to gain practical exposure to key principles and concepts.
Attend this comprehensive course and gain an in-depth overview of:- The mechanics of the main commodity markets including: precious metals; base metals; energy; bulk commodities; agricultural and softs
- Hedging techniques for the different commodities sectors
- Techniques to manage commodities risk exposure
- Exchange-traded and OTC commodity derivatives and their applications in risk management
- Methods for de-risking commodities financing activities specific to project finance, trade finance and reserve base lending
- Selecting investment strategies appropriate to market conditions
Who should attend:
The course has been designed to be accessible to those with no prior exposure to commodity derivatives, and to develop and enhance the knowledge of those already working with commodities.
It would benefit:- Commodities players
- Physical market players
- Credit and equity analysts in the commodity sector
- Financiers
- Investors
- Traders
- Treasury Managers
- CFOs and Finance managers
- Regulators and auditors
A basic knowledge of capital markets, financial mathematics and derivatives is assumed. -
Day 1
Core Commodity Concepts
Introduction to Commodities- Definition and classifications
- Principal price drivers
- Spot and forward prices
- Contango, backwardation and convenience yield
Financial Markets for Commodities- Cash and physically settled forwards
- Exchanged traded futures and options
- The main commodity exchanges
- Size of futures markets
- Size of OTC markets
- Common OTC products
- Centrally cleared OTCs
Workshop: Exploring the differences between using futures and swaps to hedge price risks
Commodity Types
Precious Metals- Good delivery
- Allocated and unallocated metal
- Price benchmarks and lease rates
- Metal forward prices
- Precious metals futures
- Industry bodies
Base Metals
- The London Metal Exchange and the physical market
- LME brands
- Warrants and seller’s option
- Warehousing and stocks
- Trading on the LME
- LME contract dates
- Price benchmarks
- Other base metals exchanges
Workshop: Comparing London and Shanghai copper prices
Day 2
Crude Oil and Distillates- Classifications of crude oil
- Global crude benchmarks
- Crude price differentials
- Distillates: gasoline, kerosene, diesel, gasoil, VGO, fuel oil & bunkers
- Trading oil and distillate products
- Physical assessments
Focus Session: Using Exchange for Physicals
Natural Gas
- Shale gas and LNG
- European and US gas markets
- Oil indexation
Agricultural and Soft Commodities
- Differences to mineral and petroleum resources
- Grains
- Corn and wheat
- The soy complex and the crush
- Seasonality and forward prices
- Softs
- Sugar, cocoa, coffee and cotton
Case Study: Dealing with basis risk in grains
Bulk Commodities
- Physical pricing conventions
- Coal
- Coal classifications
- Financial markets for coal
- Steel
- Long and flat products
- Steel derivatives
- Iron ore market development
Day 3
Managing Commodity Exposure
Using Commodity Derivatives
- Fixed for floating swaps explained
- Using forward structures
- Trading spreads: cracks, diffs and the crush
- Options and swaptions strategies
- Typical strategies for:
- Producers
- Consumers
- Physical traders
- Processors
Workshop: Unpicking an energy consumer’s hedging strategy
Taking a Discretionary Exposure
- Why invest in commodities?
- Commodity indices
- Exchange Traded Products
- Commodity linked notes
Financing Structures
Financing Producers
- Early stage funding
- Royalties and streaming
- Reserve based and corporate lending
- Common hedging strategies
Export and Trade Finance
- Commodity route to market
- Protecting the value of the collateral
- Margin call financing
- Tripartite agreements
Workshop: Combining a hedge with trade finance
Concluding summary and questions
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Our Tailored Learning Offering
Do you have five or more people interested in attending this course? Do you want to tailor it to meet your company’s exact requirements? If you’d like to do either of these, we can bring this course to your company’s office. You could even save up to 50% on the cost of sending delegates to a public course and dramatically increase your ROI.
If you want to run this course at a location convenient to you or if you want a completely customised learning solution, we can help.
We produce learning solutions that are completely unique to your business. We’ll guide you through the whole process, from the initial consultancy to evaluating the success of the full learning experience. Our learning specialists ensure you get the maximum return on your training investment.
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We have a combined experience of over 60 years providing learning solutions to the world’s major organisations and are privileged to have contributed to their success. We view our clients as partners and focus on understanding the needs of each organisation we work with to tailor learning solutions to specific requirements.
We are proud of our record of customer satisfaction. Here is why you should choose us to help you achieve your goals and accelerate your career:
- Quality – our clients consistently rate our performance ‘excellent’ or ‘outstanding’. Our average overall score awarded to us by our clients is nine out of ten.
- Track record – 10/10 of the world’s largest banks have chosen us as there training provider and we have delivered training across the largest banks and have trained over 25,000 professionals.
- Knowledge – our 100+ strong team of industry specialist trainers are world leading financial leaders and commentators, ensuring our knowledge base is second to none.
- Reliability – if we promise it, we deliver it. We have delivered over 25,000 events both in person and online, using simultaneous translation to delegates from over 99 countries.
- Recognition – we are accredited by the British Accreditation Council and the CPD Certification Service. In an independent review by Feefo we scored 4.2/5 on service and 4.7/5 on Coursecheck
Instructor
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Emma Jenkins
My banking career started with modelling, pricing and structuring interest rate, FX and commodity derivatives. Now, I divide my time between consulting to commodity companies and delivering training courses in this area.Biography
The course director has many years’ experience covering commodity markets, derivative pricing and structuring, and loan origination. After graduating from Trinity College, Dublin, with a BSc Hons, a gold medal and Foundation Scholarship in Mathematics, she commenced her banking career in the Goldman Sachs graduate program. After this, she joined Westpac Banking Corporation where she was responsible for the design and implementation of derivative pricing models for the interest rate and FX trading desks. She moved into the commodity arena when she joined Credit Suisse to market complex hedge structures in precious metals and associated financings. She later joined Macquarie Bank as a specialist commodity director, where she provided a complete banking service to clients in the base and precious metals, and oil and gas sectors. She is currently a director of a consulting business which specialises in commodity price risk management and related expert witness work. Her clients range from central banks and regulators, large miners, traders and manufacturers, wealth managers, through to small import/export businesses, thereby giving her a unique insight into the issues facing the many market participants.
