Introduction to Commodities

Training Provided by London Financial Studies Course Outline Current commodity markets have been growing and evolving for almost thirty years. Today, markets are more transparent, traded by a much more diverse group of financial participants and have been significantly impacted by globalisation vs. regional markets of the past. The key to participating successfully in these markets is to understand the unique features that exist in each product class, the impact of fundamentals on price action, and the limitations of current financial products in managing the risk. This course will review the development of commodity markets, describe current commodity markets including how products are defined and traded, and will provide a discussion of challenges faced in current markets through new regulations, globalisation and unprecedented volatility. Practical applications will be utilised in each segment of the course. Who The Course is For * Traders * Sales/Marketing * Financial Product Structurers * Investment Bankers * Risk Managers * Fund Managers Prior Knowledge Basic knowledge of finance required.

Introduction to Commodities Day One

Basic framework of commodity markets

* What are the different categories?
* Physical vs. financial markets
* Introduction to energy/oil sector


How to trade commodity markets

* An introduction to forward vs. futures and OTC vs. exchange markets
* Currency risk and discounting
* Managing credit concerns


How to build a simple forward curve

* Introduction to seasonality, market transparency and liquidity
* Understanding and using historical data


Workshop: Creating a standard forward curve
Volatility and Correlation

* What volatility and correlation are and their importance in each unique commodity market?
* An introduction to volatility Smile and Skew and their relevance to pricing


Workshop: Building a volatility curve and the evaluation of historical data

* Links between global commodity markets
* Transportation markets; LNG supply chain


Workshop: Freight and product transportation
Day Two

Commodity Option Markets

* Review of basics
* Physical vs. financial, transportation options
* Examples of vanilla and exotic options
* Common hedging challenges

Workshop: Client hedging examples; Oil producer hedging, Gas distributor hedging
Electricity Markets

* Basic models of electricity markets
* An introduction to spark spreads, dark spreads and transmission spread options
* Variable costs and emissions

Workshop: Independent Power Producer: Spark Spread Hedge
Trading Styles and Techniques

* Financial vs. Physical; Technical vs. Fundamental approach
* Portfolio Management
* Risk Management
* Understanding the impact of market sentiment

Workshop: Trading Game: Evaluate your trading skills through several market events
Future Commodity Markets

* Regulation and Oversight Issues/Changes
* Water, LNG, Enhanced weather derivatives
* Key developments for future commodity markets

About The Training Provider: London Financial Studies

More Other Asset Classes Training from London Financial Studies

• Commodities and Commodity Derivatives
• FX Exotic Options
• Property Derivatives
• Structured Products Design Pricing and Implementation
• Volatility Trading and Managing Risk