Commodity Derivatives

Euromoney Learning Solutions

How long?

  • 3 days
  • in person

Euromoney Learning Solutions


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About the course

Succeed in commodities markets, hedging strategies & risk management techniques

Effective commodity price risk management is becoming a critical differentiator of business performance for any company producing, trading, consuming or using commodities as part of their manufacturing or distribution process. Price volatility and increasingly complex commodity markets are the main influencing factors and companies that proactively and efficiently manage their commodity price risk will gain a competitive advantage over their peers especially when it comes to profit margin. Bankers, trade financiers and investors alike can also benefit from the vast risk appetite opportunities in commodities. This practical training course has been designed to provide delegates with a comprehensive overview of the commodities markets, hedging strategies and risk management techniques to effectively manage commodity exposure. The first part of the programme is an introduction to the main commodity asset classes, their market structures and the main players in the commodity markets. It also introduces the concepts of derivatives instruments used in commodity trading.

The second part of the programme focuses on how to manage commodity price exposure through hedging techniques using exchange traded and OTC derivatives. Drawing upon numerous examples, and through the use of industry-specific case studies and workshops, participants will learn several techniques for dealing with the scope and complexity of commodities trading and risk management. The course also explores the investment vehicles available for accessing commodity exposure and the financing options in the commodities sector, including: royalties and streaming; project finance; corporate facilities; trade and export finance.

Practical learning:

The training will comprise a combination of classroom-based teaching combined with real-life case studies and workshops to gain practical exposure to key principles and concepts.

London Metal Exchange site visit:

To reinforce the learning in the practical context, participants will have the opportunity to witness open outcry trading during a site visit to the LME during the course. Delegates are advised that the LME operates a smart casual dress code.

Attend this comprehensive course and gain an in-depth overview of:

  • The mechanics of the main commodity markets including: precious metals; base metals; energy; bulk commodities; agricultural and softs
  • Hedging techniques for the different commodities sectors
  • Techniques to manage commodities risk exposure
  • Commodities exchange-traded and OTC derivatives and their applications in risk management
  • Methods for de-risking commodities financing activities specific to project finance, trade finance and reserve base lending
  • Selecting investment strategies appropriate to market conditions


Day 1

Core Commodity Concepts Introduction to Commodities

  • Definition and classifications
  • Principal price drivers
  • Commodity cycles and recent performance
  • Spot and forward prices
  • Contango, backwardation and convenience yield

Financial Markets for Commodities

  • Futures contracts
  • The main commodity exchanges
  • Size of futures markets
  • Physical and cash settled futures
  • Size of OTC markets
  • Common OTC products
  • Centrally cleared OTCs

Workshop: Exploring the differences between using futures and swaps to hedge price risks

Commodity Types

Precious Metals

  • Good delivery
  • Allocated and unallocated metal
  • Price benchmarks and lease rates
  • Metal forward prices
  • Precious metals futures
  • Industry bodies
  • Gold: monetary asset or commodity
  • Silver and the PGMs

Base Metals

  • The London Metal Exchange and the physical market
  • LME brands
  • Warrants and seller’s option
  • Warehousing and stocks
  • Trading on the LME
  • LME contract dates
  • Price benchmarks
  • Other base metals exchanges

Workshop: Comparing London and Shanghai copper prices

Day 2

Energy Markets

  • Classifications of crude oil
  • Global crude benchmarks
  • Crude price differentials
  • Focus on Brent vs WTI
  • Distillates
  • Gasoline, kerosene, diesel, gasoil, VGO, fuel oil & bunkers
  • Trading oil and distillate products
  • Physical assessments
  • Principal energy futures
  • Exchange for physical
  • Natural gas
  • LNG and shale gas
  • European and US gas markets
  • Oil indexation

Focus Session: Using Exchange for Physicals

Agricultural and Soft Commodities

  • Farming basics
  • The impact of climate effects
  • Market size
  • Grains
  • Corn and wheat
  • The soy complex and the crush
  • Seasonality and forward prices
  • Softs
  • Sugar, cocoa, coffee and cotton

Case Study: Dealing with basis risk in grains

Bulk Commodities

  • Physical pricing conventions
  • Steel
  • Long and flat products
  • Steel derivatives
  • Iron ore market development

Day 3

Using Commodity Derivatives

  • Fixed for floating swaps explained
  • Using forward structures
  • Comparing forwards, loans and prepays
  • Trading spreads: cracks, diffs and the crush
  • Options and swaptions strategies
  • Swing contracts

Typical strategies for:

  • Producers
  • Consumers
  • Physical traders
  • Processors

Workshop: Unpicking an energy consumer’s hedging strategy

Taking a Discretionary Exposure

  • Why invest in commodities?
  • Commodity indices
  • Exchange Traded Products
  • Commodity linked notes

Financing Structures

Financing Producers

  • Early stage funding
  • Royalties and streaming explained
  • Reserve based and corporate lending
  • Common hedging strategies

Export and Trade Finance

  • Commodity route to market
  • Where should the financier sit?
  • Protecting the value of the collateral
  • Tripartite agreements

Workshop: Combining a hedge with trade finance Focus Session: Learning from others’ mistakes


Emma Jenkins

The course director has many years’ experience covering commodity markets, derivative pricing and structuring, and loan origination. After graduating from Trinity College, Dublin, with a BSc Hons, a gold medal and Foundation Scholarship in Mathematics, she commenced her banking career in the Gol...

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Commodity Derivatives at Euromoney Learning Solutions

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