Archives: Trainingen

In this part we provide a demo of software that was developed to amongst others determine the hedging effectiveness, optimal hedging ratios, basis risk etc and allows foe running what if scenarios.

In this part we discuss what needs to be understand when using the information embedded in futures and options and when taking a position in the futures and or option market. That is we show what at least must be understood before acting on the information generated in these markets are actually participating in these markets.

In this part we introduce the concept of options. The simple strategy of buying a call option (and hence calculating the maximum selling price) and buying a put option (and hence calculating the minimum selling prove will be discussed) using the knowledge generated in the previous parts of the course. In addition we show some option strategies (fencing) and elaborate on dynamic option hedging (delta hedging).

How do we deal with hedging from a company’s accounting perspective? In this part we introduce the basics of hedging accounting and hedging protocol in the context of international accounting rules (IFRS9).

In this part we discuss the concept of spreading. We define various types of spreads and demonstrate with examples how spreads play an important role in commodity futures markets. In addition we discuss two type of orders that a market participate can use to enter the futures market and relate that to the previous parts in particular market liquidity.

Many firms and persons participate in futures markets. In this part we segment these market participants based on a set of characteristics and explain the role of non-hedgers in these markets.

In this part we introduce and discuss the role of the clearing house, its functioning and the margin requirements when trading futures.

In this part we introduce a risk generated by commodity futures markets that need to be recognized: market liquidity risk (a lack of market depth). We discus the basics of the concept of market liquidity and strategies that can help to mitigate this risk.

In this part we define and measure hedging effectiveness and the corresponding optimal hedging ratios. With this knowledge we can address questions like: Should I hedge? What futures contract or combination of futures contracts yield the best risk reduction? How many contracts should I use? In addition we introduce software that can calculate the hedging effectiveness and optimal hedging strategies for various strategies.

In this part some assumptions that we made in part 2 are relaxed: most importantly the assumption that the spot price is equal at maturity of the futures contract. We discuss the concept of the basis (difference between spot and futures price), basis risk, basis patterns, target price and cross hedging. In addition the concept of hedging effectiveness and optimal hedging ratios are introduced.