Course:FRE517
| FRE 517: Futures Trading of Agricultural Commodities | |
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| FRE 517 | |
| Section: | |
| Instructor: | Jacqueline Wong, MBA |
| Email: | jac.wong@ubc.ca |
| Office: | TBA |
| Office Hours: | TBA |
| Class Schedule: | Feb 24 to April 09
M/W 3:30- 5 pm |
| Classroom: | MCML 154 |
| Important Course Pages | |
| Syllabus | |
| Lecture Notes | |
| Assignments | |
| Course Discussion | |
COURSE DESCRIPTION
This course explores the use of risk management tools in the lumber commodity and foreign exchange markets. In the context of these two markets, students will get a practical understanding of using futures and options to hedge and to speculate. The course will begin with knowledge of the lumber cash market and how the various players use futures to hedge their cash positions. We will then follow the life of a futures trade to compare futures and cash pricings; this overview will subsequently form the foundation to understand basis in futures trading. In the next stage, we will incorporate foreign exchange risks in international trade and take a look at other derivative products. As the course progresses, students will integrate and build upon concepts and skills from this and different courses in order to manage practical problems at hand. Class participation will be encouraged to simulate a trading floor where ideas and information are openly discussed.
LEARNING OUTCOMES
By the end of this course, students will be able to:
- Describe macroeconomic factors that affect supply and demand in domestic and global markets and the subsequent effects on commodity prices.
- Understand how commodities are traded in cash markets, explain the risks involved, and be able to apply options and futures to manage these exposures.
- Identify basis opportunities and express the views through futures and options trades.
- Analyze the pros & cons of various hedging strategies in the perspective of different market players along the supply chain as well as that of the investment community.
- Evaluate and explain the dynamics of speculation vs hedging in the futures market that determine futures pricing.
- Integrate data (such as spreads) & current market information with pricing analysis and forecasts to make informed hedging / speculative decisions.
ASSESSMENT REPORT
Utilizing your weekly trade updates you will create a report that highlights the main areas:
- How Futures & Options Trading exposed you to an industry where you can see yourself work and why.
- A detailed description of the differences between theoretical and practical applications in Futures & Options Trading.
REAL-WORLD APPLICATIONS IN CLIMATE, FOOD & ENVIRONMENT
- What is the role of commodity markets in global trade, food security, and risk mitigation?
- What are the differences between theoretical and practical applications in Futures & Options Trading?
- How do the futures and cash markets contribute to pricing analysis and forecasting in commodities?
- What are the dynamics and opportunities of speculation vs hedging in the futures market?
- How does trading currency futures (also known as an FX future or foreign exchange future) differ from trading commodities?
ASSESSMENT METHODS
| Assignments | Best 2 out of 3 | 30 |
| Trading Simulation | Weekly Log / Journal | 20 |
| Participation | Iclicker & class discussion | 10 |
| Mid Term Exam | 25 | |
| Final Report | 15 | |
| TOTAL | 100 | |