Thursday 11 November 2010

Post-congress seminar 1

Investing in Commodities: Basics & Beyond

Led by George Skiadopoulos, Associate Professor, Department of Banking and Financial Management, UNIVERSITY OF PIRAEUS and Associate Research Fellow, Financial Options Research Centre, UNIVERSITY OF WARWICK

8.30 Registration and coffee

9.00Introduction to commodities

• Definition & ways of trading
• Case study 1: What factors affect the stock returns of commodity-related companies? An application to the maritime industry

9.20 Understanding commodity futures risk premia

• Theory of Normal Backwardation
  - Implications for investing in commodities
  - Does the theory hold? Empirical evidence
• Hedging Pressure Hypothesis
• Basis, Risk premium, & commodity returns

10.30 Morning break

11.00 Understanding commodity futures prices: Theory of storage

• Pricing commodity futures by the storage theory
• Estimating the convenience yield
• Does the theory hold? Empirical evidence
• Understanding the term structure of futures prices & modeling its dynamics

11.30Forecasting commodity futures prices:

• Point & Interval forecasts: The techniques
• Case Study 2: Directional trading with commodities
• Case Study 3: Forecasting the term structure of energy commodity futures.

12.30 Lunch

13.30Pricing commodity derivatives

• Pricing commodity derivatives under the Black-Scholes (1973) assumptions
• Does the BS model price commodity derivatives accurately?
  - Implied volatilities in commodity markets
  - Alternative stochastic processes
• More realistic models to price commodity derivatives
• The equilibrium approach to pricing
• One factor, two factor, & three factor models
• A Heath-Jarrow-Morton (1992) approach

15.00 Afternoon break

15.30 Commodities as an asset class

• Differences with investing in equities and bonds
• Investing in commodities: Empirical evidence
• Case study 4: Asset allocation with stocks, bonds & commodities
• Commodity Indices
  - Major indices & construction methodologies
  - Performance attribution & the importance of roll returns
• Measuring Alpha from investments in commodities
  - Inventories & Hedging pressure as relevant factors
• Constructing trading strategies with commodity futures using backwardation & inventories as signals
• Risk management in commodities: The Value-at-Risk (VaR) approach
  - Case Study 5: Measuring VaR for Energy Commodities
  - Case Study 6: Measuring VaR for Freight rates

17.00 End of seminar