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Executive Summer School
London School of Economics
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The Finance of Commodities: Physical Assets, Financial Instruments and Risk Management

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The aim of this intensive course is to give an introduction into commodity trading and the use of commodity derivatives in corporate risk management.

Dates: 23 - 27 June 2014
Fees: £4,750
Teaching faculty: Dr Philippe Mueller| and Dr Andrea Vedolin|

Register here for a detailed course outline.|

London is an important hub for international commodity trading, making the LSE well placed to influence and learn from respected practitioners within this sector. The course is led by permanent members of the LSE’s department of finance, which has a reputation for leading its field in both teaching and research. Our expert faculty have focused on an asset class that is becoming increasingly relevant but that has, to-date, been largely neglected in both academic research and teaching. 

Programme Benefits:

  • Qualitatively understand the relevant tools and practices relating to commodity trading
  • Better equip yourself with the tools and knowledge to understand and manage the different sources of risk and value in commodity investment projects, and sales and procurement contracts
  • Heighten your ability to critically assess the risk and return of alternative proposals
  • Develop and implement appropriate strategies to achieve favourable prices when buying and selling commodities while minimising risk and maximising value.
  • Learn how to ask the right questions in order to positively influence your decision-making.

This executive course is particularly suitable for:

  • Professionals within natural resource companies, commodity trading houses and banks, and in trading, sales, and procurement groups
  • Key staff within the treasury departments of major non-financial institutions such as utilities, airlines, refiners, or consumer goods companies
  • Executives looking to gain an overview of the current state-of-the-art and best practice approaches in any of the aforementioned industry sector
  • Buyers and sellers of commodity derivatives in non-financial institutions who are engaged in risk management activities and are looking to level the playing field when dealing with banks and other financial intermediaries
  • Previous Executive Summer School participants who have studied the Derivatives, Financial Risk Management or Corporate Finance and Strategy courses, but want to further specialise in the field of commodities.

This intensive five day course begins with a discussion of the particularities of commodities as an asset class that arise from their physical nature: the distinction between (physical) spot and (financial) forward markets, the term structure of prices and volatilities, and the links between prices that come from co-production and substitution effects.

After introducing the basic financial commodity instruments, swaps on spot indices and futures and options on them, we will focus on their use in corporate hedging applications. We go on to consider the objectives and constraints of corporate hedgers such as ratings/financial distress, cash considerations, practical credit risk mitigation, and the implications of tax and accounting rules. These considerations will then be applied in a case study on the structuring of commodity supply contracts.

Lastly, we will consider real options as a source of value and consider practical means of monetising this value by selling, charging, and hedging by studying examples from a range of industries.

Course format:

The course is a mixture of lectures, group discussions, case studies, and interactions with visiting guest lecturers from industry who will address the practical issues surrounding the implementation of the theories learnt.

“Great teachers, good approach, the course teaching was perfect”

2013 participant on Financial Risk Management taught by Philippe Mueller and Andrea Vedolin

Our Executive Summer School client list includes;

  • Barclays Capital
  • Bank of America Merrill Lynch
  • Bank of England
  • British Embassy
  • Commonwealth Bank of Australia
  • Credit Suisse
  • Deutsche Bank
  • Diageo PLC
  • Dutch Ministry of Justice
  • European Central Bank
  • European Commission
  • Fidelity Investments
  • Financial Services Authority
  • Foreign & Commonwealth Office
  • German Development Cooperation (GIZ)
  • HSBC
  • Japan Bank for International Cooperation
  • JP Morgan Chase
  • KPMG
  • Microsoft