Semester.ly

Johns Hopkins University | EN.550.653

Commodities and Commodity Markets

3.0

credits

Average Course Rating

(4.28)

The first half of this course will be devoted to energy markets, both in terms of the market itself and how to model peculiar features of this business. First we will discuss fossil fuels, including physical and financial natural gas and LNG; crude and refined petroleum commodities; and possibly coal markets. Then the focus will turn to electricity markets, including market structures; energy, capacity and ancillary services markets; characteristics of demand; power plant commitment and dispatch; the “stack” or market supply curve; characteristics of different plants and fuels; regional differences in markets; and hedging techniques from trading vanilla products all the way to complex multi-commodity structures. We will discuss renewable energy sources, their characteristics, economics, and effects on the larger market, as well as emissions markets as a way of removing pollution externalities. The first half will conclude by elaborating on risk management techniques; credit; legislation and regulation; and derivative accounting as time permits. The second half of the course will turn to shipping, metals and agricultural markets. The metal physical markets will be described, the major Exchanges presented (LME, SHFE), as well as the warehousing issues in the case of base metals. The case of precious metals will be singled out, and gold in particular; and finally uranium and rare earths. Agricultural (grains and softs) markets will be presented, together with the crucial issues of biofuels, fertilizers, water, and arable land. In all cases, there will be a large focus on the trading activities – both to hedge and to gain exposure to commodities – in spot and derivative markets. Numerous examples of forward curves will be provided, as well as volatility skews. The valuation of swaps, spread options and Asian options will be (re)derived. Students should have rudimentary knowledge of financial markets. Recommended Course Background: EN.550.420 and AS.110.106 or AS.110.108

Spring 2013

(4.28)

Spring 2014

(3.89)

Spring 2015

(4.67)

Spring 2013

Professor: Helyette Geman, Gary Schultz

(4.28)

The best aspects of the course included the comprehensive and practical material students learned. The professors were knowledgeable and able to convey some of the topics really well. The worst aspects of the course included the difficult sections and lectures that didn’t go in-depth into some of the topics. The course would improve if there were more systematic lecture notes, solutions to the homework 18 problems, and better explanation of the topics from both professors. Prospective students should know that this course is somewhat chal enging and they should have some background in commodities, finance, and financial derivatives.

Spring 2014

Professor: Helyette Geman, Gary Schultz

(3.89)

The highlights from this course were the practical real world knowledge, insightful instructors, and trading strategies. The class transitioned from lecture to discussion over the semester giving students the chance to pick the instructors brains. However, many thought the three hour class period twice a week was far too much, and there were complaints regarding feedback on graded material. Suggested improvements to the class include having shorter class periods, better feedback on graded assignments, and more real life examples in the first half of the semester. Prospective students should know that the amount of time spent in class can be challenging, and having a background in programming and financial math is essential. 18

Spring 2015

Professor: Helyette Geman, Gary Schultz

(4.67)

The best aspects of this course included the wel -prepared lectures, the good balance of theory and application, and the comprehensive lecture notes circulated prior to lecture meetings. Students found that the professor was highly knowledgeable and well organized, but that he occasionally moved too quickly through slides, particularly with more difficult material. A few suggested that he had the tendency to come off as condescending to students. Suggestions for improvement included more frequent and detailed feedback on assignments and tests. Prospective students should have good working knowledge of algebra and matrix, and a background with optimization will be beneficial.