Course and Examination Fact Sheet: Autumn Semester 2020

5,115: Asset-backed Commodity Trading

ECTS credits: 4

Overview examination/s
(binding regulations see below)
Decentral ‑ Written examination (50%, 60 mins.)
Examination time: term time
Decentral ‑ Written examination (50%, 60 mins.)
Examination time: term time

Attached courses
Timetable ‑‑ Language ‑‑ Lecturer
5,115,1.01 Asset‑backed Commodity Trading, Group 1 ‑‑ Englisch ‑‑ Paraschiv Florentina
5,115,1.02 Asset‑backed Commodity Trading, Group 2 ‑‑ Englisch ‑‑ Paraschiv Florentina
5,115,1.03 Asset‑backed Commodity Trading, Group 3 ‑‑ Englisch ‑‑ Schürle Michael Hermann
5,115,1.04 Asset‑backed Commodity Trading, Group 4 ‑‑ Englisch ‑‑ Schürle Michael Hermann
5,115,1.05 Asset‑backed Commodity Trading, Group 5 ‑‑ Englisch ‑‑ Rif Alexandru‑Septimiu
5,115,1.06 Asset‑backed Commodity Trading, Group 6 ‑‑ Englisch ‑‑ Rif Alexandru‑Septimiu

Course information

Course prerequisites
In order to run the trading software from home, students should have access to a Windows‑based PC (or a Mac based system
with emulation software allowing for Windows and Windows applications to be executed, for example: Parallels or VMWare
Fusion).

Learning objectives
Students understand energy markets and specific factors that affect prices of energy
They get an understanding of the price formation on exchanges for energy and how to react to price changes
They are introduced to the relation between risk and return and learn how to consider risk constraints in trading
decisions

Course content
Increasingly large quantities of energy and energy derivatives are traded on exchanges every day. Moreover, in the last years
there has been a notable influx of energy trading by financial institutions and portfolio investors that view commodities in
general, and energy in particular, as a distinct asset class that improves portfolio risk‑return characteristics through the effects of
diversification. Compared to financial assets, energy prices are on short term more affected by political events. However, the long
term trend of energy prices is determined by the limited availability of fossil fuels, but also the commitment of many nations to
decarbonization of their energy systems to meet CO2 emission targets.

This course discusses the functioning of selected energy markets and factors that influence prices of energy and energy
derivatives. It introduces students to trading fundamentals, investment concepts, as well as trading techniques and strategies.
Particular emphasis is placed on the observation of risks:

1. Fundamentals of oil, gas and electricity markets

2. Speculating vs. hedging
3. Energy derivatives: Forwards, futures and options
4. Market orders vs. bid and ask orders
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 5. Application of statistical concepts in risk management
6. Risk measurement and risk management
7. Futures pricing in commodity markets
8. No‑arbitrage principle

Course structure
The course consists of three components:

(1) introduction to markets and trading tools,

(2) trading sessions, and

(3) performance measurement and discussion

The focus lies on the risk‑adjusted management of open positions with tradable instruments for consumption commodities in
volatile markets

Course literature
Burger, Gräber/Schindlmayr (2014): Managing Energy Risk: An Integrated View on Power and Other Energy Markets, 2nd
Edition, Hoboken, N.J: Wiley 2014.

Pirrong/Mollagholamali (2013): Energy Derivatives and Markets, in: Simkins, B., & Simkins, R. (eds.). Energy Finance and
Economics: Analysis and Valuation, Risk Management, and the Future of Energy (1 edition). Hoboken, N.J: Wiley 2013, pp. 365‑
378.

Popova/Simkins (2013): Introduction to Energy Risk Management, in: Simkins, B., & Simkins, R. (eds.). Energy Finance and
Economics: Analysis and Valuation, Risk Management, and the Future of Energy (1 edition). Hoboken, N.J: Wiley 2013, pp. 379‑
410.

Hull, J. C. (2011). Options, Futures and Other Derivatives (8th edition. Global Edition.). Boston, Mass.: Prentice Hall, Chapter 18:
The Greeks, pp. 377‑408.

Additional course information

In the case of the Presidentʹs Board having to implement new directives due to the SARS‑CoV‑ 2 pandemic in Autumn Semester
2020, the course information listed above will be changed as follows:

The course is conducted online via the platform Zoom and Video Lectures;
The lecturer informs via Canvas or e‑mail on the changed implementation modalities of the course.

The examination information listed below would be changed as follows:

Both the Trading and Written Examinations are to be conducted online

Examination information

Examination sub part/s

1. Examination sub part (1/2)

Examination time and form
Decentral ‑ Written examination (50%, 60 mins.)
Examination time: term time

Remark
Risk‑Adj. Trading Performance

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Examination-aid rule
Extended Closed Book
The use of aids is limited; any additional aids permitted are exhaustively listed under ʺSupplementary aidsʺ. Basically, the
following is applicable:

At such examinations, all the pocket calculators of the Texas Instruments TI‑30 series and mono‑ or bilingual dictionaries
(no subject‑specific dictionaries) without hand‑written notes are admissible. Any other pocket calculator models and any
electronic dictionaries are inadmissible.
In addition, any type of communication, as well as any electronic devices that can be programmed and are capable of
communication such as notebooks, tablets, mobile telephones and others, are inadmissible.
Students are themselves responsible for the procurement of examination aids.

Supplementary aids
‑‑‑

Examination languages
Question language: English
Answer language: English

2. Examination sub part (2/2)

Examination time and form
Decentral ‑ Written examination (50%, 60 mins.)
Examination time: term time

Remark
Written Exam

Examination-aid rule
Extended Closed Book
The use of aids is limited; any additional aids permitted are exhaustively listed under ʺSupplementary aidsʺ. Basically, the
following is applicable:

At such examinations, all the pocket calculators of the Texas Instruments TI‑30 series and mono‑ or bilingual dictionaries
(no subject‑specific dictionaries) without hand‑written notes are admissible. Any other pocket calculator models and any
electronic dictionaries are inadmissible.
In addition, any type of communication, as well as any electronic devices that can be programmed and are capable of
communication such as notebooks, tablets, mobile telephones and others, are inadmissible.
Students are themselves responsible for the procurement of examination aids.

Supplementary aids
‑‑‑

Examination languages
Question language: English
Answer language: English

Examination content
The first part of the written exam consists of a trading simulation, where students are assessed on the basis of their trading
performance (profits achieved under observation of risk constraints). In the second part students reflect their own trading
performance and answer general questions about the course contents.

Examination relevant literature

Exam‑relevant literature will be announced in class.

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 Please note
Please note that only this fact sheet and the examination schedule published at the time of bidding are is binding and
takes precedence over other information, such as information on StudyNet (Canvas), on lecturersʹ websites and
information in lectures etc.

Any references and links to third‑party content within the fact sheet are only of a supplementary, informative nature and
lie outside the area of responsibility of the University of St.Gallen.

Documents and materials are only relevant for central examinations if they are available by the end of the lecture period
(CW51) at the latest. In the case of centrally organised mid‑term examinations, the documents and materials up to CW 42
are relevant for testing.

Binding nature of the fact sheets:

Course information as well as examination date (organised centrally/decentrally) and form of examination: from
bidding start in CW 34 (Thursday, 20 August 2020);
Examination information (regulations on aids, examination contents, examination literature) for decentralised
examinations: in CW 42 (Monday, 12 October 2020);
Examination information (regulations on aids, examination contents, examination literature) for centrally
organised mid‑term examinations: in CW 42 (Monday, 12 October 2020);
Examination information (regulations on aids, examination contents, examination literature) for centrally
organised examinations: two weeks before the end of the registration period in CW 44 (Thursday, 29 October 2020).

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