The purpose of this seminar is to give you a good understanding of the functioning of commodity and energy markets and of the instruments that are traded in these markets, as well as practical understanding of how these instruments can used for investing, trading, hedging and risk management.
We start with a general introduction to commodities and commodity markets. We give you an overview of the global commodity markets, and we discuss the general characteristics of commodities such agricultural, metals, precious metals and oil. We also discuss the short and medium term outlooks for global commodity markets.
We then take a closer look at the economics of commodity markets. We discuss the global economic and geopolitical issues that affect the supply, demand and prices of commodities, and, using storage theory, we explore the relationship between spot and forward commodity prices, and we explain important concepts such as "convenience yield" and the term structure of commodity prices.
Further, we introduce commodity derivatives including futures, options and swaps. We explain their mechanics and risk-return characteristics and demonstrate how they are priced using the cost-of-carry model and a range of different option pricing models. We also explain how derivatives are used to construct structured commodity products, and we also explain and demonstrate how commodity derivatives can be used to implement simple as well as more sophisticated strategies for investing in and for trading and hedging commodity risk.
In the second part of the seminar, we look more in-depth into energy and "climate" markets. We give an overview of the energy markets and discuss how recent years' liberation of these markets has created new opportunities for traders, investors and risk managers. We also explain the mechanics and pricing of weather derivatives such as futures and options on temperature and we demonstrate how these instruments can be used to speculate in or to hedge against "climate changes".
Finally, we look at the relatively new and increasingly interesting and important markets for trading "pollution" such as carbon emission.