Course Overview

Commodity hedging involves taking positions in complex derivatives, which carry high risk. Positions in futures and options may provide hedging benefits but also involve payoffs that may be disproportionate to costs or premiums paid. It is important for managers in risk management, audit, accounting, MIS roles and for bankers and analysts to understand implications of each commodity hedging strategy in terms of payoffs, risks and rewards. Further, it is important to understand the legal and regulatory framework around this area to ensure that compliances are effective.

Training DurationTotal Training Hours : 30 Hours
Training Duration : 1 Week
Total Training Days : 5 Working Days
Training SchedulesWeekdays (Sunday to Thursday)
Regular Sessions : 6 Hrs Per day (9am to 2pm or 3.00pm to 9.00 pm)
Food & refreshments Included

WeekEnds (Friday & Saturday)
Fast Track Sessions: 8 Hours per day (9am to 5pm)
Food & refreshments Included
Certifications:1) Certificate from Laurels Training Institute, Attested by Knowledge & Human Development Authority (KHDA) government of Dubai, UAE

2) Certificate from American Institute of Professional Studies (AIPS) from USA (After 15 Days of course Completion which will couriered to the attendees office address)
Learning AidsYes
Course MaterialHard & Soft Copies of Study Material
Language of InstructionEnglish
Instructor HelplineYes
1. Email
2. Social Media (For Emergency requirements)
Registration Requirements1. Passport Copy
2. Curriculum Vitae
3. Passport size photographs
4. Course Fee
Mode of Payment:Cash / Cheque / Credit Card / Bank Transfer.
Eligibility Criteria
(Who should attend this training)

Professionals from Risk, Audit, Accounting, MIS

Senior management - both finance and operations

Banking and other lending institutions

Course Benefits

This program seeks to provide the market view to such managers and will cover derivative product topics, regulatory framework, accounting and risk management areas.

The program does not seek to provide advice or tips on what to buy and when to buy and is not intended to get a trader to trade better.

There is no prior knowledge of commodities or hedging required

Course Contents / Outline

"Spot, basis, and forward prices in commodity markets

Overview of derivatives contracts in commodity markets

Spot and basis price models: GBM, mean reversion, jumps

Simulation of spot price models in Excel and visualization of price paths

Mark to market and pricing models

Market risk management: VaR, stress tests, backtests

Advanced Hedging

Using ""proxies"" for hedging analysis; review of regression analysis applied to hedging

Using a single vs. multiple proxy hedges

Examples of basis hedging in metals and agricultural markets

Delta hedging of option portfolios; key considerations.

Delta-gamma hedging

Delta-gamma-vega hedging

Cross-hedging and cross-market Greeks; spark spreads; crack spreads, fx-commodity price risks

Commodity Price Behaviour (II): Overview of Forward Curve Models

Forward curve behavior

Analysis of gold forward curve; explaining Contango and Backwardation changes

One factor models of the forward curve: uses and limitations

Multi-factor and multi-commodity models

Multi-factor models (Cholesky-based) and principal component analysis (PCA); Uses and pitfalls

Excel exercises of PCA and structured Monte Carlo simulation; VaR and valuation calculations of energy derivatives

Valuation and Hedging of Physical Assets and Long Term Contracts as Real Options

Real option in commodity markets

Case study: Mining projects and Real Options

Commodity transportation capabilities as a locational spread

Generation assets and Refineries as real options

Understanding and valuing the optionality in storage facilities

LNG trading and locational spread and timing options

Advanced Market Risk Management for Commodity Trading

Introducing volatilities as risk factors

Advanced historical simulation: EWMA HS and volatility-updated HS

Marginal VaR analysis: applications for hedging and risk management

Case study: Identifying natural portfolio hedges in commodity portfolios

Backtesting VaR models: frequency and magnitude of losses

Tail ""heaviness"" and tail ""asymmetry""; expected tail loss and other risk measures

Extreme value theory VaR and ETL

Key insights from behavioral finance regarding misperception of extreme risk probabilities

Case study: diagnosis and recommendations for model improvements based on backtest results

Earnings at Risk and Cash Flow at Risk

Earnings at risk and cash flow at risk for multiple maturities

Natural risk drivers and macro hedges

Margin-at-risk calculation and liquidity risk management

Dynamic simulation of portfolios responding to changing market conditions

Evolution of prices, volatilities, and correlations in a dynamic simulation framework

Integration of commodity, FX, and Interest rate risks

Case study: Use of Cash Flow at Risk by BHP Billiton

Counterparty Risk Management

Potential counterparty exposure for commodity derivatives

Counterparty risk trading in commodity trading

Expected vs. potential future exposure

Case Study: Step by step PFE Excel calculations and interpretation for forwards, swaps and options

Counterparty VaR and dynamic potential exposure

Potential exposure and the role of margin, collateral, and settlements

Adding default probabilities for different time frames

Using potential credit exposure to determine limits

Advanced Derivatives Valuation and Hedging

Pricing and hedging options with volatility surfaces

Calculation and use of skew-adjusted delta and gammas

Case study: Stress Test Matrices with Price and Volatility Shocks

Volatility surfaces and implied price distributions

Stochastic volatility models in commodity markets

Valuation and hedging of exposures with volumetric risk"

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