BF3214 commodities trading assignment sample NTU Singapore

This course will prepare you for a career in the global commodities markets by providing insight into conventions, supply chains, risk management and investment techniques. It’ll give you an understanding of key industry participants across the commodity supply chain along with insights to market terminology and best practices in risk management.

TOA,TMA, GBA Assignment sample of commodities trading  module NTU Singapore

 At the end of this course, Singaporean students will be able to learn commodities trading module with the help of the following learning outcomes:

1.Articulate key global commodity market terminology and conventions

Commodities are used in the production of goods that are then sold and traded. The most common type of commodity is raw materials, like iron ore or wheat. Commodity markets involve transactions in raw material products manufactured into finished products by industry. Trading at large scale results in a combination of trade financing to reduce risk and cash management product trades for inventory hedging purposes.

A benchmark crude contract traded on the NYMEX (New York Mercantile Exchange) where prices can be seen as an average across various types of crude oil from many around the world with set pricing intervals creating differential values when trading certain grades for pricing reference.

2. Identify and quantify financial risk associated with key participants across the commodity

Financial risk associated with key participants across the commodity market Individuals and businesses are exposed to risks in their day-to-day operations, including relying on a creditable currency for transactions. Shifts or changes in interest rates, inflation rates, economic growth rates, or trade agreements appear to have an impact on the value of underlying assets. Financial markets can react differently to risk factors because of investor expectation and individual financial needs.

For example, a cautious investor who is close to retirement will usually withdraw any investments that may go down during periods of volatility while an aggressive investor might invest more when prices look better than average as they still believe high returns are likely within the next few years.

3. Define the importance of risk management and analyze basic risk management techniques

Risk management is a process of reducing the probability and potential consequences of something going wrong. Effective risk management allows you to control your exposure to “bad things” that can happen, and gives one the power to decide how much “risk” they want in their life, and how much they’re willing to spend money in order to reduce risks (see insurance, investment options). It also helps one be aware of what actions might be harmful for themselves or other people.

For example, some people take on dangerous yet lucrative jobs such as lumberjacking because there’s higher risk but more reward than say being a dentist. Clearly it’s up to each individual as well as society what degree of risk is acceptable given the benefits at stake.

Basic risk management is very simple, but it’s also very powerful. Learn to identify the risks you can control and change them in your favor. Live with the risks you can’t control and eliminate their damage by taking precautions that reduce the impact of potential losses on your life, business or investments.

The first rule of managing risk is to recognize that all investment portfolios contain some degree of risk-to-return tradeoff. This is a key principle holding true for any portfolio no matter what type of asset classes are used or what strategy is employed within those asset classes – whether passive buy ‘n hold trading strategies using exchange traded funds (ETFs) or active managed strategies such as market timing by rotating among various types of stocks within a specific sector or industry (sector rotation), within a market capitalization type of range (stock picking).

The second rule involves determining what risk-to-return tradeoff is acceptable to the investor. Effective risk management in any portfolio requires optimal allocation between various types of asset classes based on individual expectations and desired level of financial risk, as well as periodic rebalancing. This can be achieved by adopting an “Indexed approach” which means establishing an asset allocation model based on historical returns from various types of assets and their potential for future gains versus losses, rather than trying to achieve above average performance through stock picking or other strategies.

4. Describe the various techniques to invest commodities and how adds value to an investment portfolio

There are multiple ways to invest in commodities, two of the more popular being investing directly in the commodity or investing through a futures contract. Investing directly can be risky and time-consuming, so it is often easier and better for beginners to first buy a futures contract. You make money when you sell the futures contract back into the market at its specified date.”

For instance, if you wanted to buy corn (which currently trades at $3 per bushel) on November 1st 2014 you would need to purchase 100 shares and each share is worth three cents ($30). The contract will go until December 15th of 2014. This means that by December 15th your money would be worth 120 times what you invested!

A diverse investment portfolio invests in various assets, such as stocks, bonds and mutual funds. This diversifies your risk by spreading out the investments across many different kinds of assets. Additionally, not all types of asset perform well at the same time; so by diversifying among them with a portfolio you can even out your returns over the long term.

For example, should stocks perform poorly, a bond can help make up for those losses. The key is to have an allocation that makes sense given your personal financial goals and preferences, as well as any other factors such as those mentioned above like age and amount to invest each month or year.

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