ACE 428: Commodity Futures and Options
This course focuses on the design, pricing, and practical uses of derivatives including forward, hedge-to-arrive, futures, swap, and option contracts; hedging and speculation using cash-settled or commodity-settled instruments; the operational procedures and issues in using futures markets; the operation of commodity exchanges and public regulation of derivatives trading; and, the evaluation of market performance.
Prerequisites (Must be complete BEFORE taking this course):
ACE 222 or FIN 300 or equivalent
Instructor Teaching the Course:
This course is taught by the instructor below. You may click on their name to learn more about them. Teaching schedules vary by semester. Please check the Course Explorer for the most up-to-date information about the sections they will teach.
Pedro Tremacoldi Rossi
Dr. Michel A. Robe
View the Course Explorer:
See when the course is offered as well as section details here: https://courses.illinois.edu/schedule/terms/ACE/428
Spring 2019 Restrictions
Restricted to students in majoring in Agricultural and Consumer Economics or minoring in Food and Agribusiness until Monday, November 12 at 10:00 am.
Additional Course Information
Read more about what Dr. Robe has to say about ACE 428!
Is this class discussion-based or lecture-based? How would you describe your teaching style?
The course is lecture-based. Questions from students are keenly encouraged, and the level of class interaction is high. According to feedback from former students, my teaching is fast-paced yet thorough, demanding yet engaging, in-depth yet grounded in business reality.
How are students evaluated (e.g. multiple choice or essay tests, papers, etc.)?
Grading is on a curve. The weights for the final grade are as follows:
Exams: Either 55% Final Exam
or Max[30% MT1+25% MT2, 25% MT1+30% MT2]
Group assignments (cases): 20% each
Class participation: 5 %
There are two MT exams: one after Columbus Day (on Thursday, October 11th, 2018) and the other on the penultimate week of classes (on Thursday, December 6th, 2018).
There is also one Optional Final exam. The final exam is comprehensive and replaces both of MT exam scores – but anyone may opt out from sitting the final. For those who do not opt out, the score on their final exam replaces the scores for the two MT exams. The final exam takes place on the assigned day in the final exam week.
Because the course is designed to emphasize practical skills, students must complete two cases that use actual data. To reflect how most companies conduct business, students handle these assignments in groups of 3 or 4.
What careers does this course help prepare students to pursue?
Former students say that what they learned in ACE-428 was instrumental in obtaining jobs (and succeeding at their jobs) trading grains and oilseeds for commercial companies such as Cargill, ADM, or FC Stone and also for investment banks; working for FCMs and IBs locally or in Chicago; managing commodity price risk for companies such as Kellog and Nestlé; and dealing with farm lending at commercial banks.
What courses can students take to prepare for this material?
The only formal prerequisite for ACE-428 is to have obtained a grade of C or better in ACE-222 Agricultural Marketing or in FIN-300 Financial Markets. For ACE students, having taken ACE 345 (small business finance) or FIN 221 (corporate finance) can be helpful—but is not required.
In what ways does this course prepare students to move through the program and/or into the work force?
The course is designed to teach students about derivatives concepts, instruments, and markets. The emphasis is on thinking intuitively about commodity derivatives’ uses, pricing, and trading. The critical thinking that students develop in the course can be applied anywhere. The specific knowledge gained is directly applicable in the business world – see the section on “careers” above.
What is your background in Agricultural and Consumer Economics?
I am the Clearing Corporation Foundation Professor in Derivatives Trading at the College of ACES. I was detailed to the U.S. Commodity Futures Trading Commission (CFTC, the market regulator) as a Senior Economist in 2006, and again in 2008 and 2009, amid unprecedented volatility in commodity markets. I have continued to advise the CFTC as a consultant ever since. Since 2016, I am also a member of the JP Morgan Center for Commodities’ Research Council. I have written numerous research and policy articles on agricultural and commodity markets. My work has appeared in the two top field journals (the American Journal of Agricultural Economics and the Energy Journal) as well as in leading generalist finance and economics journals such as the Journal of Financial Economics, the Journal of Financial and Quantitative Analysis, the International Economic Review, and the Journal of Futures Markets. My current work deals with commodity market volatility, the organization of commodity derivatives markets and their microstructure, and the protection of customers in agricultural futures market.
What is your attendance policy?
Class participation is important and is explicitly rewarded (5% of the total grade). Effectively, the class participation grade may change a grade near a cutoff. While I do not penalize occasional tardiness, a pattern of repeated unexplained late arrivals shall negatively impact the class participation grade. Understandably, job searches or other obligations may occasionally conflict with class. It is students responsibility to (i) let me know and (ii) to find out from their classmates what has been missed during an absence.