AGRICULTURAL COMMODITIES DERIVATIVES MARKETS
Learning outcomes of the course unit
The objective of the course is to provide an economic understanding of the development and operation of futures and options markets.
Particular attention is focused on the hedging effectiveness that provides how much is it possible to reduce price risk trough futures contracts. Hedging effectiveness is not an absolute concept, but varies depending on the type of the operator. All the operators working along the food supply chains have a potential interest for hedging, but for everyone hedging has its own meaning.
Course contents summary
The commodity contracts provide foundation for understanding price formation. In the developed agri-food systems the importance of futures and options markets has grown remarkably and today they influence food marketing and food security.
The attention is focused on the dimensions and characteristics of the Commodities Exchanges with particular reference to contractual and market regulation mechanisms.
Futures markets perform several functions: they provide the instruments to transfer price risk, they facilitate price discovery and they are offering commodities as an asset class for financial investors, such as fund and money managers who had not previously been present in these markets.
The course ends with an analysis of future markets in order to understand if they are efficient in the risk management and are also a viable perspective as food security tools.
The course is based on the following topics:
1 – Fundamental Analysis of Agricultural Commodity Markets
2 - Origins of Futures and Options Trading
3 – Market Mechanics in Commodities Exchanges
4 – Price Risk and Basis Risk
5 – Speculators and Technical Analysis
6 – Hedging
The main readings are the lesson notes from the course and texts selected by the
- Materiale didattico per il corso di Mercati Finanziari delle Commodity Agricole, Università degli Studi di Parma, Parma, 2012.
- S. Serra, M. Zuppiroli : Il mercato dei cereali, Edagricole – Edizioni agricole del Sole 24 ore, Milano, 2009.
- C.A. Carter : Futures and Options Markets. An Introduction, Waveland Press Inc., Long Grove, Illinois, 2007.
The course is based on frontal lessons and exercises followed by the teacher.
Assessment methods and criteria
The exam consists of open ended written questions.