The Fundamentals of Commodity Risk and Its Derivatives

Training Description

Fundamentals of Commodity Risk and Derivatives

The training "Fundamentals of Commodity Risk and Derivatives" provides an in-depth exploration of the mechanisms and strategies used to manage risks associated with commodity price fluctuations.

Typology and Characteristics of Commodities

Participants will discover the different types of commodities, the specificities of this asset class, and an overview of recent trends in major commodities.

Risk Hedging Mechanisms

The training will also cover key risk hedging mechanisms used by commodity producers and consumers, as well as the different hedging derivatives: futures, forwards, swaps, and options.

Derivative Instruments for Hedging

A detailed analysis of commonly used derivative instruments will help participants understand how they function and how they can be integrated into a risk management strategy.

Case Studies and Practical Applications

Numerous case studies will allow participants to see how these instruments can be used for hedging, from both the producer’s and consumer’s perspectives.

Training Objectives

• Understand the different categories of commodities.
• Analyze hedging issues from the perspective of both producers and consumers.
• Learn the factors influencing the value of a commodity futures contract.
• Understand the functioning of a commodity swap.
• Utilize futures contracts, swaps, and options for commodity hedging strategies.

Target Audience

• Commodity supply chain professionals
• Commodity traders and brokers
• Financial analysts specializing in commodities
• Risk managers in commodity production and consumption companies
• Investors interested in the commodity markets
• Risk management and hedging strategy consultants
• Executives and professionals in agriculture, energy, and minerals sectors seeking to understand market dynamics and risk hedging strategies

Training Duration

• 2 days

Training Program

Fundamentals of Commodity Risk and Derivatives

I. Commodity Markets

• Market Functioning
• Typology
• Main Indices
• Difference Between Commodities and Financial Assets

Practical Case:

Review and discussion of recent price trends of various commodities

II. Principles of Commodity Risk Hedging

• Definition
• Types of Risks
• Main Indices
• Key Players: Producers and Consumers

III. Futures and Forward Contracts

• Definition, Role, and Functioning
• Difference Between Spot Price and Futures Price
• Contango and Backwardation
• Factors Influencing Futures Prices:
• • Interest Rates
  • Logistics, Storage Costs, and Convenience Yield
  • The Concept of No Arbitrage Opportunity
• Forward Contracts
• Main Market Participants

Practical Case:

Analysis of the Technical Sheet of Futures Contract No.9 on Sugar

IV. Commodity Swaps

• Definition
• Role
• Functioning

Practical Case:

Example of a Hedging Strategy on Sugar (from the Producer and Consumer Perspective)

V. Commodity Options

• Definition and Functioning: Calls and Puts
• Factors Influencing Option Pricing: The Greeks

Practical Case:

Example of a Hedging Strategy on Sugar (from the Producer and Consumer Perspective)