Commodity Risk & Hedging learning path: everything to study, topic by topic

Identifying and classifying commodity price exposures including long and short physical positions, inventory exposure, and forward purchase or sales commitments

Decomposing the total delivered price into the flat (benchmark futures) price component and the basis component that captures local and quality differentials

Understanding the fundamental drivers of commodity prices including production, consumption, inventories, seasonality, and macroeconomic factors

Valuing open positions at current market prices, computing daily profit and loss, and understanding how mark-to-market drives margin and reporting

Using exchange-traded futures contracts to hedge price exposure, including contract specifications, margining, and the mechanics of long and short hedges

Hedging with calls and puts to manage price risk while preserving upside, covering premiums, strike selection, and payoff profiles

Using commodity swaps to convert floating price exposure into fixed price, including fixed-for-floating structures, settlement, and over-the-counter terms

Building costless and premium collars by combining bought and sold options to bound price exposure within a floor and a ceiling

Managing the price differential between a delivery location and the benchmark futures delivery point, including transport cost and regional supply-demand

Managing the price differential arising from grade, quality, or specification differences between physical product and the benchmark contract

Trading and managing the price difference between contract months, including contango and backwardation and their effect on roll yield

Managing spread relationships between related commodities such as crush, crack, and spark spreads, and the correlation risk in cross-hedging

Determining the optimal hedge ratio to minimize residual risk, including the minimum-variance hedge ratio and adjustments for basis and correlation

Managing the roll of hedge positions across contract months to maintain coverage, including roll timing, roll cost, and stack-and-roll strategies

Establishing hedge policy, governance, mandates, and limits that define what, how much, and when the firm hedges and who has authority

Measuring potential loss with Value-at-Risk using historical simulation, variance-covariance, and Monte Carlo methods, and interpreting confidence levels

Measuring portfolio risk through sensitivities such as delta, gamma, vega, and theta and using them to manage option and hedge positions

Evaluating portfolio resilience under extreme but plausible scenarios, including historical replays, hypothetical shocks, and reverse stress testing

Managing variation and initial margin and credit support annexes that govern collateral exchange between counterparties in OTC trades

Measuring and mitigating the risk that a counterparty fails to perform, including credit exposure, default probability, and netting

Operating the collateral lifecycle including eligibility, haircuts, optimization, disputes, and the liquidity impact of posting and receiving collateral

Assessing and documenting hedge effectiveness using prospective and retrospective tests to qualify for hedge accounting treatment

Designating and documenting hedging relationships including fair value, cash flow, and net investment hedges and the required documentation at inception

Preparing risk disclosures for financial statements covering hedging objectives, exposures, sensitivities, and the effects of hedge accounting