Introduction to Commodity Markets

Introduction to Commodity Markets

With the enhanced volatility we experienced over the last 3 years (oil went from $10/bbl to 137 after that back to 70, copper mosted likely to $4000/t before coming to a head at $8000/t) there is a natural increase sought after for danger management products and most importantly training on all the ins and outs of hedging these risks.

What is much more, lots of companies with direct exposure to commodities are rather (otherwise very acquainted) with these exposures as they are either a) pure assets players or; b) have had these for a long period of time.

What is doing not have (as well as hence the objective of this course) is some training on how to hedge these risks in the derivative non-prescription (OTC) markets. What do I mean? With the introduction of futures (and the marketing push led by the significant exchanges) there is a fair amount of material out there on exactly how to hedge product threat with futures, and most exchanges even run basic courses on just how to hedge with futures (also known as their products).

The London Metals Exchange runs (rather pricey) training courses on danger management for steels. There isn’t however (not that I have actually seen anyway) any kind of great, comprehensive course on how to hedge these risks in the OTC market that exceeds the standard things “this is an ahead, this is a swap, this is an alternative, and so on”.

7 years into my career assisting corporates hedge their product cost threat OTC (which interestingly sufficient is where the majority of the quantity is traded, NOT futures) I am getting a boosting variety of inquiries from clients on how these feature and if I (or any person else) can give some training on them.

Numerous banks will sell as well as structure you the item, yet very couple of will show you just how they function beyond the really essentials that you require to acquire their item. Those that are not in the market (i.e. not banks and significant asset trading houses) that have a similar level of refinement, have actually needed to invest years learning this stuff “occasionally.” There isn’t a course that can show you all this in one go as there would be for passion prices or FX.

This is what inspires this course. A program that in a few hrs can offer you a hands-on view of derivatives run the risk of management in the commodities globe. There will be some theory, but just the bare minimum called for to recognize the motorists of the item. A lot of it will be a hand-on practitioners’ sight of just how to hedge rate threat in the real life.

Let me present myself. After a degree in business administration as well as finance I traded unique asset derivatives for a significant investment bank in London. I after that relocated onto to pursue a masters in mathematics and finance prior to returning to the banking globe this time around in an even more sales and also structuring client-facing role aiding corporates (primarily in Europe and also Asia) handle their product cost threat. Just visit the link of mercaris here, for more updated news on commodity market.

As the threat management and by-products globe ends up being an increasing number of complex (regardless of the lowered danger hunger as a result of the fall-out of CDOs) I strongly think that the extra quantitative ones’ history the far better positioned one will be to manage monetary threats. Currently I lead the commodities take the chance of management effort for Southern Europe in behalf of a major European financial investment financial institution.

What topics will I be covering? The field is huge and time is precious. I suggest beginning with the following:

  • Oil markets
  • Base metal markets
  • Counterparty threat effects

I make certain a lot more subjects will show up down the line but these are the ones where I am getting one of the most demand right now. Hope this helps. Satisfied reading!

Stephen S. Davidson

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