Financial Markets

Commodity Derivatives

Face-to-face3 days

Course Overview

GBRW’s Commodity Derivatives training programme is designed to clarify the opaque world of physical commodities and the constantly evolving commodity derivative markets. This comprehensive course takes participants through the main commodity sectors, and illustrates how price risk arises and can be managed. By the end of this course, participants will be able to identify selling opportunities within the bank’s existing customer base, structure and implement appropriate derivative solutions, and understand the measures and controls that will help the bank run a commodity business. It is especially geared to bankers and institutions in emerging markets, where commodities are often vital to the local economy and domestic banks lag the large international commodity players. The Course Instructor has extensive experience in all aspects of commodity derivatives theory and practice, and the course is enlivened with a set of rich case studies and intensive group work exercises.

  • Understand . . .

    The main commodity sectors and how price risk arises and can be managed

  • Learn about . . .

    The commodity risks that your customers might be exposed to, and how to help them mitigate those risks

  • Find out how to . . .

    Protect the value of commodity collateral

Objectives: Participants in this course will come away with…

  • A solid grounding in the principal commodity sectors, and the relevant terminology
  • A sound understanding of derivative structures and their applications
  • A detailed insight into how to de-risk commodity lending transactions
  • An appreciation of the suite of products available to investors and the relevance of investment flows to the physical market
  • The confidence and knowledge to question and challenge subject matter experts

Course Instructor

Emma Jenkins

Course Instructor

Emma Jenkins is a commodity expert with over 20 years’ experience in commodity derivatives and finance. As a commodity banker, Emma structured and implemented derivative strategies which were often large, long-dated, complex and/or placed into illiquid markets. Her experience includes physical, financing and investment transactions, in metals, crude oil, gas and distillates, agricultural commodities, coal, iron ore and steel.

Emma currently runs a risk advisory consultancy, which specialises in all aspects of commodity price risk management and offers expert witness services. Her clients range from the largest resource producers, central banks, regulators, trade houses, to smaller manufacturers, agri co-operatives and recyclers. Previously she worked for Goldman Sachs, Credit Suisse and Macquarie Bank.

Drawing on a wealth of professional experience, Emma has delivered training workshops in Dubai, Hong Kong, India, Malaysia, Russia, Singapore, the US and throughout Europe. Her training style is pro-active and participative. She encourages high levels of delegate engagement in each session with Case Studies and Workshops, and is known for her patience and responsiveness to delegate questions.

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Course Modules

  • 1. the basics

    • What is a commodity? Where do they come from? The main players and price drivers
    • Spot and forward prices; interpreting the forward curve
    • Combining physical and derivatives
    • Identifying suitable derivatives
    • Cash and physically settled forwards
    • Exchange traded and OTC markets
    • Commodity swaps, Asian options
    • Central clearing

  • 2. metals

    • Commodity or currency
    • Good delivery, allocated and unallocated metal
    • Price references, lease rates and borrowing costs
    • The LME, CME and SHFE
    • Warehousing and delivery

  • 3. energy

    • Crude classifications and pricing
    • Distillates, refining, cracks and diffs
    • Exchange for physical
    • Natural gas, LNG and the impact of shale
    • Physical assessments: Platts, Heren
    • Futures and indexed pricing

  • 4. agriculture

    • Grains and oilseeds
    • Sugar, cocoa, coffee and cotton
    • Agflation, biofuels, seasonality

  • 5. bulks

    • Coal: Thermal and coking
    • Steel
    • Iron ore

  • 6. strategies

    • Using forwards, swaps, loans and prepays
    • Spreads: cracks, diffs and the crush
    • Options and swing
    • Protection and commitments
    • Understanding credit consequences

  • 7. financing

    • Early stage funding, royalties and streaming
    • Reserve-based and corporate lending
    • Fine-tuning the hedge
    • Key aspects of physical contracts
    • Determining the borrowing entity and protecting the value of collateral
    • Tripartite agreements

  • 8. investment

    • Why invest in commodities?
    • Commodity indices, exchange traded products, commodity linked notes
    • Interpreting investor activity and why it matters

  • 9. asessing risk

    • Market, basis, rollover and model risk
    • Operational considerations
    • Avoiding disasters, questions to ask

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