Commodity Trading and Risk Management in Energy and Mining Industries module (CP52073)

This module will provide you with an understanding of theories and tools used in commodity trading and risk management for energy and resource industries. It explores the financial theories and modelling techniques relating to commodity trading both in physical and financial markets, options pricing, real options valuation of physical assets, and risk management in the energy and mining industries.

Topics include:

• Commodity Forward and Futures
• Options
• Basic Risk Management Strategies Using Options
• Option Pricing: the Binomial Model
• Option Pricing: The Black-Scholes Model
• Real Options
• Portfolio Theory
• Optimal Risky Portfolios and CAPM

What you will learn

In this module, you will:

• formulate trading strategies in commodity markets
• competently calculate the value of real option valuation of physical assets in the energy and resources sector
• identify the financial risks and formulate creative strategies for risk management in energy and mining industries

By the end of the module, you will be able to:

• critically understand financial derivatives used in commodity markets
• develop an apprehension of theories and models for pricing commodity futures, options, and real options

critically understand financial risks and risk management strategies in energy and mining industries

Assignments / assessment

• class assignments (20%)
• individual project (80%)
  • apply theories and models from the module to appraise an investment project or formulate a risk management strategy

This module does not have a final exam.

Teaching methods / timetable

• lectures
• seminars
• group discussions