Overview
This course introduces forward contracts, futures contracts, options, swaps, and related derivatives used in copper markets. It examines exchange-traded and over-the-counter markets, contract specifications, margining, clearing, settlement, delivery, cash settlement, collateral, and counterparty arrangements.
Students develop quantitative and practical skills in cost-of-carry relationships, forward pricing, basis, convergence, contango, backwardation, calendar spreads, convenience yield, and the effects of interest rates, storage, insurance, and financing costs. Options coverage includes calls and puts, intrinsic and time value, moneyness, payoff diagrams, volatility, implied volatility, binomial valuation, introductory Black-Scholes valuation, and the Greeks.
Applications address producer and consumer hedges, inventory protection, procurement budgets, speculative positions, collars, and rolling strategies. The course also evaluates basis risk, liquidity risk, model risk, leverage, margin calls, counterparty exposure, stress testing, and the documentation of controls for responsible derivatives use.
Learning Outcomes
- Explain the institutional structure, contract terms, and lifecycle of exchange-traded and over-the-counter copper derivatives.
- Calculate forward and futures prices using cost-of-carry relationships, including storage, insurance, financing costs, interest rates, and convenience yield.
- Calculate derivative payoffs, profit or loss, basis changes, margin requirements, and settlement outcomes for common copper-market positions.
- Apply binomial and introductory Black-Scholes methods to value basic options and interpret intrinsic value, time value, moneyness, and implied volatility.
- Interpret delta, gamma, theta, vega, and rho and evaluate their implications for hedging, valuation, and portfolio exposure.
- Evaluate producer hedges, consumer hedges, inventory protection strategies, procurement budgets, collars, calendar spreads, and rolling strategies.
- Assess basis risk, liquidity risk, model risk, leverage, margin-call exposure, counterparty risk, and stress-test results when comparing derivatives strategies.
- Construct and document a responsible derivatives risk-management plan with appropriate controls, monitoring procedures, and reporting standards.
Timetable
| Type | Length | Frequency | Period |
|---|---|---|---|
| Lecture | 2 hours | Weekly | All semester |
| Tutorial | 1 hour | Weekly | All semester |
| Workshop | 2 hours | Fortnightly | All semester |
| Seminar | 1 hour | Fortnightly | Second term |
Assessment Schedule
| Type | Description | Weighting |
|---|---|---|
| Quiz | Online quizzes (5 × 2%) | 10.00% |
| Assignment | Derivative pricing and payoff analysis | 15.00% |
| Test | Practical mid-semester test | 20.00% |
| Capstone | Copper hedging and risk-management case | 25.00% |
| Exam | Final examination | 30.00% |
Prerequisites
- Requirement 14 NCEA Level 2 Mathematics credits, externally assessed
Teaching Staff & Programs
This course is delivered jointly by faculty from the participating programs listed below. In line with the Douchewater Way, the University of Sexology tailors core instruction directly to each cohort's specific discipline — adapting curriculum to program needs rather than forcing students into a one-size-fits-all model. Learn more about our approach at The Douchewater Way.
