Advanced Training in Commodity Economics and Finance : Module 5 - Pricing commodity derivatives
Objective of the training
At the very heart of the international trade and financial system, the complex but fascinating world of commodities has emerged over the last decade as an inescapable field of study for those who want to comprehend the economic and geopolitical stakes of the early 21st century. Recognizing the importance of the issue and keen to pursue its actions, based on a long-term vision and initiated with the “advanced training program for Economic Analysis and Management”, the OCP Policy Center will launch, from January 2016, a second training program for commodity economics and finance. In line with our “think, stimulate, bridge” motto, it is designed to train executives and senior civil servants in all the economic and financial issues related to commodity markets, and to give them the appropriate tools to handle them. This very unique 180-hour training program will be divided into six 30-hour modules.
The target group
This program is dedicated to people identified as high potential with a background in economics or finance and who have accumulated a minimum of 3 years experience. The number of participants will be around 25. The courses will be taught in English or French depending on the teachers.
Date & Place of the training
Date: January to June 2016 (One week per month)
Place: Ryad Business Center – South, 4th Floor – Mahaj Erryad - Rabat, Morocco
Email : firstname.lastname@example.org
Phone : + 212 (0) 5 37 27 08 08 / Fax : + 212 (0) 5 37 71 31 54
Please send your CV and cover letter to email@example.com before December 15th, 2015. The selected candidates will subsequently receive a confirmation email.
09 :00 - 10 :30 1st session
10 :30 - 10 :45 coffee break
10:45 - 12:15 2nd session
14:00 - 15:30 3rd session
15:30 - 15:45 coffee break
15:45 - 17:15 4th session
Agenda & modules of the Course
|From 18 to 22 January 2016|
Module 1 : Fundamentals of commodity markets (30 H)
By Bahattin Buyuksahin
The aim of this first course is to offer a broad overview of commodity markets. It will cover both the physical and the financial commodity markets (energy, agriculture and metals), their actual functioning, and some of the analytical tools needed to effectively understand both markets. The overall emphasis will be on the determinants of commodity prices as well as the interactions between physical and financial commodity markets. In this context, the financialisation of commodity markets and the role of speculation will be one of the central questions to be addressed.
|15 to 19 February 2016|
Module 2 : Trading commodities and hedging strategies for producers/end-users (30 H)
By Yves Jégourel
The main objective of this module is to provide the participants with a full and functional understanding of the tools and strategies needed to hedge commodity price risks using financial derivatives such as swaps, options and futures. For this purpose, we will describe how a typical commodity industry works, taking grains and base metals as examples, and elucidate how risks could be diluted between producers, end-users, smelters and traders. We will then introduce futures contracts, highlight their peculiarities and show how they can be used to set up both fix-price and offset hedging strategies. A similar approach will be carried out for options strategies. Finally, various techniques spanning from options combinations, calendar spreads to optimal hedging ratio will be studied.
|From 14 to 18 March 2016|
Module 3 : Industrial organization and investment in commodity activities (30 H)
By David Humphreys
This third module will introduce students to investment decision-making in the resources sector. It will explore the organisations that make investment decisions, the principles that guide those decisions and the processes that shape them. It will also look at how investments in the resource sector are financed, how government policies affect them and consider the development impacts of resource investments. Case studies will be used to support the teaching and to illustrate key insights. The primary focus of the module will be the mining sector but reference will also be made to oil and gas. At the end of the course students should have a better practical understanding of the range of factors that need to be taken into account in making decisions on resource investment.
|From 18 to 22 April 2016|
Module 4 : Government policies, food security and international commodity markets (30 H)
By Christophe Gouel
This fourth course proposes an analysis of agricultural and food policies with an emphasis on price volatility and governments' responses to it. This course is organized as a series of lectures of 1.5 to 3 hours and alternates between lectures on the economics of public policies and on case studies of actual policies. The goal is to explain the reasons of public interventions (arising from economic motivations and political economy), and to use economic theory to explain and predict the effects of public policies.
|From 9 to 13 May 2016|
Module 5: Pricing commodity derivatives (30 H)
By Helyette Geman
Based on the knowledge acquired from module 1 and 2, the aim of this penultimate course is to offer a broad overview of (agricultural, freight and fertilizers) commodity derivatives and to explore how they can be priced. Key question to be addressed in this course will consequently cover the positioning of commodities trading in the financial markets; the analysis of forward, swaps and futures and contracts; the presentation of the different types of options (plain vanilla, on commodity Futures, average rate options) that can be found in agricultural markets, as well as “real options”. A presentation of the structured products existing in commodity markets will finally be made. Many case studies will be also undertaken, including “the different faces of volatility”, “understanding the forward curve”, or “investing in fertilizer-producing companies as a source of alpha for hedge funds”.
|From 30 May to 3 June 2016|
Module 6 : Econometrics : time-series analysis for commodity markets (30 H)
By John Baffes
The objective of this final course is to select the appropriate time series econometric tools (not just a model) in order to understand, analyze, interpret, and communicate issues and problems related to commodity markets. The module will address policy- and market-related questions based, in part, on models and data that the instructor has used during the recent super-cycle in commodity markets. Each day will cover a broad topic, beginning with the issue/problem at hand, subsequently moving to the selection of the time series framework, followed by data selection/compilation, model estimation and testing, and finally summarizing the findings and reaching key conclusions. Each topic will begin at a basic level of econometric analysis to ensure that all participants understand and follow, then gradually advancing the analysis to eventually reach a level that would pass basic “academic requirements.” Participants will be required to have a basic knowledge of time series analysis, such as the concepts of an OLS regression and the ability to calculate basic statistics such as measures of volatility, but not issues such as non-stationarity, unit roots, and cointegration. The module will involve instruction, discussion and interaction between participants and the instructor, and actual estimation. Participants will be encouraged to bring their own datasets.
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