Workshop Agenda Certified Commodities Analyst OBJECTIVE KEY AREAS FOCUS WHO SHOULD ATTEND. About your trainer UNIQUE MARKETS SPOT COMPLEX

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1 markets are one of the more diverse markets in the capital markets arena and feature in investment portfolios in an increasing manner although traditionally they are traded in physicals taking in the whole scope of trade finance. are highly speculative, require a sound understanding on forward trading and can be found on exchange platforms as well as in Over the Counter contracts. This workshop takes an in depth look at the world of trade, OTC, investment & hedging from the commodities angle. KEY AREAS Understand the trade flow for physicals A close look into pricing spot complex markets How to manage volatility on the balance sheet of a manufacturer or trade firm. FOCUS UNIQUE MARKETS Features in energy, oil, gas, plastics, softs and metals will be discussed with sample strategies shown in spreadsheets. A focus on an end-to-end perspective on how commodities affect a firms bottom line. Case studies on hedging Foreign currency & option strategies for balancing the procurement of raw materials Risks in commodities markets SPOT COMPLEX In the spot complex world of commodities trading, escalated pricing has affected many firms through the economic supply chain however there are strategies for businesses dependent on raw materials procurement. WHO SHOULD ATTEND Treasury Staff Business Managers Chief Financial Officers Cost & Management Accountants About your trainer Risk Management Staff Trade Account Managers Business managers heavily involved in trade finance in the commodities realm. Martin specializes in designing risk measurement systems with a particular focus on regulatory capital frameworks. He has more than 10 years experience developing bespoke knowledge / workflow and scorecard solutions for financial institutions in both strategic and processing areas of the business. He has a particular interest in lending products and in assisting banks reduce capital arbitrage in their economic capital models. Primarily he is banker with experience in both retail and commercial banking and he is currently working with several banks throughout South East Asia where he assists these organisations build sound and structured frameworks that can quantify exposure. In the capital markets arena Martin has worked closely with a stock exchange in the region assisting the exchange design a new energy instrument and futures contract. In addition to Martin s work within the capital markets and banking sector he is a credited trainer for the American Academy of Financial Management on structured finance, project finance, credit and operational risk. 1 P a g e

2 Day 1 Agenda INDEPTH COMMODITIES MARKET TRENDS An end-to-end summary of global commodities markets, their growth, key driving factors & trends: Electricity & Utility / Water Oil and Gas Carbon Markets Softs & Agriculture Precious Metals Base Metals Concrete Manufactured Goods Freight Whether How to build a market knowledge base What does an investor need to know to enter a specific commodity market What are the specific metrics & driving factors of each market 08:30 Commodity Market Overview A complete study into the various markets from a top level, their growth trends and unique characteristics will be discussed. 09:30 Oil & Gas One of the most documented markets yet the oil industry is moving into a new direction traditional markets are flattening and being replaced with new demand settled in alternate manners. 10:45 Electricity Electricity is an ever evolving and the nature of cross-boarder trade, shared distributor channels is complicating what traditionally used to be big market dominated by a small number of players. 12:00 Carbon Carbon is one of the fastest growing markets and its new immergence is confusing many businesses yet energy firms, airlines and construction companies will soon have to grapple with many new regulatory requirements that are soon to be imposed on them, those that understand carbon early will benefit substantially in the next three years. 13:00 Metals A review of metals from copper to gold taking in investment strategies through to the importance steel hedging markets in Dubai. 14:00 Emerging Freight and whether are growing new commodities markets with some interesting potential. They are complex markets and will be discussed in a manner so that their commercial use can be fully understood. By the close of the first day the class should have a solid understanding of the dynamics of each market, how it operates, the main players and its general trend. 2 P a g e

3 Day 2 Agenda v TRADING & SETTLING PHYSICALS Moving away from markets the course will review the best practice for trading physicals, how firms contractually interact to protect their position as well as remit and settle. UCP 600 with case studies. Different methods for payment, their purposes, advantages and risks. The end-to-end flow of document collection : Step by step process for importing or exporting commodities. A bankers perspective and a firms perspective. 08:30 Overview of International Trade A complete overview of the entire process for trade is delivered so that a framework or straw man model can be established and evolved for the remainder of the course. 09:30 Methods of Remittance Relationships between the principal parties is described and the process flow for trade is established outlining the traditional model for fund transfer. 10:45 Payment Models Building on the primary remittance model cash terms, documentary credits, documentary collections, open accounts and consignments are discussed in further details highlighting the risks between each party. 12:00 Documentation Collection The various documents are described showing examples and conditions are outlined for release of such items. 13:00 Letters of Credit Different types of letters of credit are fully explained taking including payment, acceptance, deferred and negotiation 14:00 Workshop On different business models with examples is delivered. The attendees are encouraged to identify the specific issues with each different structure. The class will be taken through the entire process of trade and is invaluable to business that are importing or exporting commodities. The relevant legal exposures within contracts are outlined and methods for handling partial payments, avalising and consignment of goods to banks is explained. 3 P a g e

4 Day 3 Agenda SPOT COMPLEX MAREKTS The nuts and bolts of commodities trading, a very in depth look at how the various contracts types and how they work. How do futures really work? The power of the options contract How to hedge and its effects on the balance sheet. Pricing a forward position in a spot complex market. 08:30 Futures and Forwards A complete overview of both over the counter contracts moving into exchange traded positions. The focus on this session is to introduce the class into market contracts. 09:30 Options Contracts The power of the option contract, is phenomenal it takes various stances on a market and can meet both buyer and seller expectations. It allows business to hedge and profit and will be explained in detail. 10:45 Hedging Strategies Specific examples on how a business can hedge either price rises for buyers or a price collapse for sellers to protect a businesses margins. 12:00 Payoff models To understand hedging strategies and to build up a process for documenting such approaches the workshop will look at real life payoff models in spreadsheets which can be taken away. 13:00 Pricing Models This session will explain the various methods used to price a forward contract with a working example in excel clearly showing the binomial method for simple and complex option contracts. What is expensive? When should a firm take a position? All these questions can be answered using the model. 14:00 ISDA The role of the international swaps and derivatives association is becoming more prevalent in contract design and leads us into discussions around risks for firms operating with commodities. A look at how ISDA assists in controlling credit exposure. This is a detailed but fascinating day that should allow all of the participants to have a sound understanding on the strategies for trading commodities. 4 P a g e

5 Day 4 Agenda RISK MANAGEMENT FOR COMMODITIES All purchase decisions, markets, physical and cash settled are determined by their risk. In effect whether you are an investor or a procurement officer the decision on when to buy, sell and profit is governed by return and that is entirely correlated to risk. How to measure the risk in a specific market. How to establish a worst case scenario model on an investment position. How to create a model for reporting market exposure that can drive out executive management decisions. 08:30 Volatility in Balance Sheet The affects of volatility on a balance sheet and how to model such dynamics using Monte Carlo will be delivered in the workshop using examples in a statistical system. 09:30 Market Risk An in-depth look at market risk, the best practice approaches to measuring this discipline and the stances regulatory authorities are taking with financial institutions will be discussed. 10:45 Value at Risk The concept of VaR with working examples will be shown as a basic sample set and then followed up by more complex correlation models. 12:00 General Risk Framework How to build a general risk framework for measuring market risk, driving out scenarios and trigger based trading strategies so that losses can be crystallized will be built up in stages for easy understanding. 13:00 Operational Risk Models Other risks such as operational risk present specific problems for the commodities trader. How can these exposures be calculated and how should they be reported will be explained. 14:00 Workshop Energy Risk A case study on the importance of measuring market risk will be delivered using a case study on an existing commodity market such as energy. At the day close the class should have a sound understanding on risk management, its importance in commodities trading and how such measurement can be achieved. 5 P a g e

6 Day 5 Agenda INTERNAL FUNCTION trading is entirely linked to the currency that the specific instrument is bought in. Thus all purchases and sales present an immediate exposure of currency risk. Do you go long on a commodity if it is decreasing in value but then if you cash out the currency might also be depreciating in value. A trader of physicals also has to worry about their inflows and outflows of cash which is governed by a sound treasury function. How to manage FX exposure How to show a true value position at a balance sheet level taking in mark to market approaches. 08:30 Treasury A complete overview of a treasury function for a business that trades in commodities with example case studies on different business models will be discussed. 09:30 Liquidity Problems Take the basic concept of cash flow matching an outline of the key methods for managing liquidity problems will be discussed showing when to apply each strategy. A method for creating a process for reserving and how it can be used in liquidity management will be shown with an example spreadsheet. A look at other methods of boosting liquidity and the business cost of using them will also be treated and a case model on debt methods of liquidity management will be delivered. 10:45 Forex Accounting A sample balance sheet view of foreign exchange based trade and methods for modelling gains or looses from foreign transactions is discussed. 12:00 Interest Management When purchasing commodities, some firms may leverage their position using debt but such a strategy seriously complicates the model. From an equivalent loan perspective the business needs to know whether it should borrow to buy a commodity. If a business has borrowed, it needs to manage the interest risk that it has now chosen to expose itself to. 13:00 International Accounting How IAS has affected the reporting of assets and liabilities on a firms balance sheet, how such open positions need to be marked to market and reported will be outlined with example reports. This day picks some very important functions for any firm that is trading market based commodities outside the trade and is an area that needs special discussion. 6 P a g e