In Lesson 9, we focused on “futures” marketsand how simple hedges can be accomplished using exchange-traded contracts.Those provide the "building blocks" for the more advanced hedging tools. Here, we will address the “over-the-counter,” non-exchange traded markets, or “forward” contracts. Keep in mind that NYMEX Exchange contracts are referred to as “futures.” We will also cover financial “spreads” whereby traders take advantage of price differences based on location, time, or inter-commodity relationships. Finally, we will deal with financial Options which are a simpler and less costly form of hedging vs. the financial derivative contracts themselves.
At the successful completion of this lesson, students should be able to:
This lesson will take us one week to complete. There are a number of required activities in this module. The chart below provides an overview of the activities for this lesson. For assignment details, refer to the location noted.
All assignments will be due Sunday, 11:59 p.m. Eastern Time.
REQUIREMENT | LOCATION | SUBMITTING YOUR WORK |
---|---|---|
Reading Assignment: Chapters 4 & 6 - Errera & Brown | Errera & Brown | No submission |
Mini-lecture:FinancialEnergySwaps | Mini-lecture: Financial Energy Swaps page | No submission |
Mini-lecture: Financial Energy Spread Trading | Mini-lecture:Financial EnergySpread Trading page | No submission |
Mini-lecture: Financial Energy Options Contracts | Mini-lecture:Financial EnergyContracts page | No submission |
Lesson Activity: Black-Sholes Model Exercise | Lesson Activity page | No submission |
Lesson 10 Quiz Fundamental Factors (on-going) |
Summary and Final tasks page Summary and Final tasks page |
Submit through Canvas Submit through Canvas |
If you have any questions, please post them to our General Course Questions discussion forum (not e-mail), located under Modules in Canvas. The TA and I will check that discussion forum daily to respond. While you are there, feel free to post your own responses if you, too, are able to help out a classmate.