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EDHEC-Risk Executive Education

Miffre and Till State-of-the-Art in Commodities Investing Seminar - Course Contents and Outline

   

       This intensive two-day seminar builds upon the expertise and recent work of Joëlle Miffre and Hilary Till and incorporates the latest results of alternative investment research.

Contents Day One:

   

The first day of the seminar addresses such questions as:

• What are the unique characteristics of natural resources?
• What are the sources of returns in commodity investment?
• What is the case for commodities as an asset class?
• How to integrate commodities in strategic and tactical asset allocation
• How to optimise the diversification properties of commodity programmes
• How to use commodities as a hedge against inflation
• Is there a case for investing through CTAs?
• How to decide between active and passive commodity investing
• What are the advantages and disadvantages of the main commodity vehicles?
• How to choose between competing commodity indices
 


Course Outline Day One

I. COMMODITY FUNDAMENTALS
A. Commodity Types and Markets

B. Fundamentals of Commodity Futures
  • Commodity pricing theory
  • Normal backwardation, contango and the unbiased expectations hypothesis
  • The theory of storage and the pricing of commodity futures

II. COMMODITIES AS A STRATEGIC ASSET CLASS

A. Statistical Properties of Commodity Futures Returns

B. Is There a Risk Premium in Commodity Futures Markets?

C. Commodities as a Source of Diversification
  • Commodities as a diversifier of traditional portfolios
  • Optimal diversification within commodity portfolios
  • Conditional correlations with traditional asset classes
D. Commodities as a Hedge against Inflation
III. COMMODITIES AS A TACTICAL ASSET CLASS
A. Hedging Pressure-Based Strategies

B. Term Structure-Based Strategies

C. Momentum-Based Strategies

D. Double-Sort Strategies Combining Term Structure and Momentum Signals

E. Contrarian Strategies

F. Economic-Based Strategies

IV. INVESTMENT OPPORTUNITIES

A. Investment Vehicles
  • Equities, mutual funds, ETFs
  • Derivatives
  • Medium-term notes
  • Commodity Trading Advisers (CTAs)
B. Commodity Indices
  • Performance attribution
  • Comparative review of major indices and new developments

Contents Day Two:

   

The second day of the seminar addresses such questions as:

• How to create state-of-the-art commodities futures programmes
• What are the risk-management techniques specific to commodity investing?
• What are the opportunities and the pitfalls in commodity market-microstructure strategies?
• How to manage the mismatch between strategy and reporting horizons
• How to implement an institutional commodity programme
• How to carry out due diligence when selecting natural-resources managers
• What are the key lessons from recent commodity-trading debacles?
• What are the latest regulatory initiatives concerning commodity futures trading and investing?
 

Course Outline Day Two

V. DESIGNING A STATE-OF-THE-ART COMMODITIES FUTURES PROGRAMME

A. Investment Process
  • Trade discovery, sizing, entry & exit, portfolio construction, risk management
  • Strategy bucketing, balancing of long- & short-options-like trades
B. Risk Management
  • Strategy & portfolio level VaR, incremental risk measures
  • Monitoring beta risks
  • Structural breaks
  • Scenario testing
  • Inadvertent concentration risk
  • Event risks
  • Seasonally-varying correlations & emerging correlations
  • The monitoring of risk-asset deleveraging
  • Case Studies: May/June 2006; February 27, 2007; August 16, 2007; and March 2008
  • Macro portfolio hedging
  • Case Study: The aftermath of hurricane Katrina
C. Commodity Market Microstructure
  • Floor, side-by-side, and electronic trading
  • The challenges of nodal liquidity
  • Case Study: Natural gas calendar spreads
D. Risk Tolerance and Implementation Discipline
  • The issue with tick-by-tick evaluation of long-term strategies
  • Case Study: Heating oil calendar spreads
VI. IMPLEMENTING AN INSTITUTIONAL COMMODITY PROGRAMME
A. Optimal Allocation to Commodities

B. Choice of Benchmark

C. Selection of Investment Vehicles

D. Due Diligence
  • Mitigation of business risk via background checks & verification of track records
  • Investing through a managed account
  • Fraud and weak infrastructure considerations
VII. CASE STUDIES: LESSONS FROM RECENT COMMODITY TRADING DEBACLES

VIII. CURRENT POLICY INTITIATIVES

A. Commodity Regulatory Initiatives in the U.S. and in the U.K.

B. Monitoring Futures Commissions Merchants