Commodity Derivatives & Risk Management

ABOUT THE COURSE: Commodity derivatives market has witnessed tremendous growth in India. Since the setting up of different national level demutualized commodity exchanges such as NCDEX, MCX and NMCE about a decade back, the Indian commodity derivative market has achieved considerable growth in trading volume, types of commodities contracts traded, warehouse development and also has brought in significant changes to spot trading of commodities. The course covers almost the entire spectrum of commodities traded in the Indian commodity market, including agricultural commodities, crude oil, base metal, precious metal, and electricity. This course will also cover derivative contracts on weather, carbon, freight and real estate traded in international exchanges such as CME, LME, LBMA, DGCX and The Baltic Exchange etc. Fundamental concepts such as value-at- risk based margin calculation, seasonality, minimum variance hedge ratio, basis risk, commodity index creation, pricing and valuation of derivatives contracts will be discussed in earlier part of the course. Subsequently futures, options, swaps, tapos, spread contracts like crack/crush/spark on commodities mentioned earlier can be used by companies to mitigate price risk will also be discussed in detail.PREREQUISITES: Corporate Finance, Micro Economics, INDUSTRY SUPPORT: Companies belonging to Metal, Mining Agri processing, Carbon Credit trading etc. ( ITC, Balrampurchini, KCP sugar, Dabur, HPCL, BPCL, IOCL, NALCO, HINDLACO, Coal India, Hind Copper, Importers of Crude Palm Oil. Mustard Oil, etc.)

Week 1: Commodity Derivatives Trading & Commodity Exchanges, Commodity Contracts, Trading platform for Major Commodity Exchanges: Open Outcry vs. Electronics. Kerb Trading Week 2:Commodity Indices creation, Collateralized vs. uncollateralized index, commodity index based on contract side.Week 3:Introduction to Futures & Forwards, Pricing & valuation, Futures Pricing Valuation for Storable/non Storable CommodityWeek 4:Contango/Backwardation, Hedge Ratio, Pricing & Valuation of Commodity OptionsWeek 5:Introduction to Options, Swaps, Exchange of Futures for Physicals, Pricing & Valuation.Week 6:Commodity Price risk for Agricultural committee, Seasonality in prices, Contango, backwardation Week 7:Commodity Price risk in Crude Oil & Natural Gas, LOOP Storage contracts Week 8:Gold & Silver, Base Metal Commodity Derivatives. Week 9:Electricity Derivatives Pricing and TradingWeek 10:Carbon Credit Derivatives, Pricing & Trading Week 11:Weather Derivatives , Week 12:Miscellaneous Derivatives: Freight, Water, Property and Non-Farm Payroll Index, Salmon, Bitcoin Derivatives.