Liquidity and market risk management in energy and shipping markets

Helyette Geman, Director of the Commodity Finance Centre, UNIVERSITY OF LONDON and ESCP Europe - Member of the Board, UBS BLOOMBERG COMMODITY INDEX

08.30 Registration

09.00 Liquidity Risk

• Overview of liquidity measures across asset classes
• The additional measures in the Commodity space: open interest, inventory
• Recognizing the different types of players: CTAs, index traders, commercial traders
• How to account for the new CFTC regulation in Energy Futures
• A clinical analysis of spikes in electricity and freight price trajectories: are spikes due to the nature of the underlying or to the rational behavior of market players?

10.30 Coffee break

11.00 Forward curves and the key information it contains

• Inventory and Spot price Volatility
• Inventory and the shape of the forward curve.
• Examples from the crude oil and natural gas market
• The Borovkova – Geman model for the stochastic evolution of the forward curve, with and without seasonality

12.30 Lunch

13.30 Option Pricing in Illiquid Markets

• The existing models correcting Black-Scholes for options on stocks
• Incorporating illiquidity in the valuation and hedging of options on commodityspot and Futures prices
• Volatility skews and smiles in Commodity markets
• Implied Correlations in Spread Options

15.00 Coffee break

15.30 Liquidity Issues when investing in Commodities

• The key elements in the construction of a Commodity Index: components, weights, rebalancing rules
• How to account for liquidity in the design of the index and ETFs
• The shape of the forward curve and the roll yield
• The recent examples of the crude oil, natural gas and gold markets

17.00 End of seminar