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IND640_1

Derivatives, risk and markets

This is the study programme for 2019/2020. It is subject to change.


This subject gives and introduction to price determination and sources for price volatility, as well as the most common tools to address these risks

Learning outcome

The student should be able to:
Understand factors causing shifts in supply and demand
Predict how shifts in supply and demand influence price and price volatility in a market
Understand the relationship between risk and return
Use VaR to assess portfolio risk
Use derivatives to hedge market risk

Contents

The course consist of three parts; markets, risk and derivatives
The first part of the course covers the different parts of a market equilibrium. It will be shown how different factors influence supply and demand. This provides the tools to investigate the price determination process for commodities and assets as well as how market characteristics influence price volatility.
The second part will cover portfolio theory and risk management. Portfolio theory explains the relationship between risk and return and this course will provide a set of tools for portfolio analysis. In particular, Value-at-Risk (VaR) is explained. VaR is a method used in financial markets and for regulatory purposes to estimate the worst-case scenario for a portfolio, and is estimated using parametric, historical and Monte Carlo estimation methods.
The third part deals with commonly applied market based instruments to deal with price risk, such as futures contracts, swaps and options. This will include the role of speculation in commodity markets. We will also look at management of commodity stocks (storage), and its influence on price determination and price volatility, including the relationship between spot and futures markets.

Required prerequisite knowledge

None.

Recommended previous knowledge

IND500 Investment analysis

Exam

Weight Duration Marks Aid
Written exam1/14 hoursA - FCalculator.

Coursework requirements

Three mandatory exercises
All must be accepted before a candidate is allowed to take the exam.

Course teacher(s)

Course teacher
Atle Øglend , Roy Endre Dahl , Frank Asche
Course coordinator
Sigbjørn Landazuri Tveteraas
Head of Department
Tore Markeset

Method of work

Overlapping courses

Course Reduction (SP)
Economics of Energy Markets (MØA285_1) 5

Open to

Master level in science and technology
External candidates

Course assessment

Course evaluation takes place according to the Faculty`s guidelines.

Literature

Tomek, W. G. and H. Kaiser (2014) Agricultural Product Prices. Cornell University Press, Itacha.
Compendium with excerpts from C. Alexander. Market Risk Analysis vol. IV: Value-at-Risk models. (ISBN 978-0-470-99788-8), and other relevant articles for the second part.
Supplementary notes to part 3 of the course will be handed out


This is the study programme for 2019/2020. It is subject to change.

Sist oppdatert: 13.11.2019

History