Commodity Futures and Risk Management: Insights and Lessons Learned from the Crude Oil Treasure (Yuanyou Bao)

The Caixin Insight and the Modern Risk Society jointly hosted a webinar event titled “Commodity Futures and Risk Management: Insights and Lessons Learned from the Crude Oil Treasure (Yuanyou Bao)” on Friday, May 15th, 2020. The Webinar was live streamed by Caixin Video and is available for playback at Caixin. (Watch video here and read slides here)

The webinar was hosted by Dr. Jian Chen, the Founder and CEO of CreditWise Technology. As the featured co-speaker, Peng Xiong, a well-known global macro trader and founder of the Global Business Leading Index(GBCI), emphasized that commodity price is not only determined by demand-supply dynamic process but also by global financial risk attitude. Liquidity has important impact on oil’s negative price. Chinese financial firms and industry companies must learn how to dance with unstable global financial systems.

The other featured co-speaker, Dr. Wenfeng Wu, Professor of finance and the deputy dean for Faculty & Research at the Antai College of Economics and Management, Shanghai Jiao Tong University shared his view on the extreme risks in derivatives trading, how the negative WTI oil prices triggered the extreme losses for many investors and what regulation can do to mitigate such risks.

Following two featured speakers’ presentation, five panelists joined the discussion, including Tianyang Wang, Xin Chen, Jie Fu, Alex Gansch, and Jun Wang.

Tianyang, Associate Professor at Colorado State University, discussed the different aspects of the crude oil market, including investment vehicles, commercial traders vs speculative players, a variety of risks involved, such as the risks of paper oil product and risk management suggestions for retail investors.

Xin, Professor at Shanghai Advanced Institute of Finance (SAIF), discussed how the Crude Oil Treasure (Yuanyou Bao) might have severe defects on its product design, including inadequate disclosure of risks, inappropriate client selection and insufficient risk management, etc.

Jie, CEO of Caixin Data Technology, emphasized that that conflict of interest is the biggest unspoken truth in financial advisory, investors are trend chasing and don't realize the conflict of interest. Independent analytical and service providers should play an important role in a healthy ecosystem.

Alex Gansch, Chief Executive Officer of Singapore-based Gresham Asia Pte Ltd, discussed the importance & benefits of broad portfolio diversification when investing in commodity futures contracts, which can be achieved, especially by Chinese investors, tracking the China Commodity Index (“CCI”), developed by Gresham and jointly-launched with its partner Caixin in 2018. Equally important, Alex pointed out the significance of active commodity futures rolling by an experienced manager in an economic-cycle-proven strategy and investment product.

Jun, Professor at China Agricultural University, provided further discussion from the aspect of financial risk management, innovation and openness though the incident of crude oil treasure.

The webinar host, Dr. Jian Chen also provided his valuable insights and led the discussion on several audience questions including what retails investors should do in face of black swan events, regulations’ rule in best protecting investors, and the financialization of commodity trading among others. The webinar is technically supported by Dr. Fang Chen, Finance Professor at University of New Haven.

About The Caixin Insight

Caixin Media Company Limited is a media group dedicated to providing financial and business news through periodicals, online content, mobile apps, conferences, books and TV/video programs. Caixin Media aims to blaze a trail that helps traditional media prosper in the new media age through integrated multimedia platforms. The Caixin Insight brings you an inside view on what's happening in the world's second biggest economy, designed exclusively for selected institutions, investors, and entrepreneurs with exposure to China.

About The Modern Risk Society (MRS)

The Modern Risk Society (MRS, https://cirforum.org/) proactively promotes research broadly related to financial risk management. It actively hosts research seminars and the annual China International Risk Forum (CIRF) with the affiliated universities. Researchers from both academic and industry who are interested in financial economics, risk management and related subjects exchange their thoughts about issues related to the financial market. Through these efforts, MRS aims to sharpen people's understanding in risk and uncertainty and to envision future risk management practice.

Speaker Biographies:

Jian Chen (moderator)

Dr. Jian Chen is the founder and CEO of CreditWise Technologies, Co. Ltd. He also serves as the senior advisor of MSCI’s China ABS business, and the senior advisor of Caixin Insight Group. He previously held the positions of Managing Partner of RQuest Financial Services Group, Managing Director in IFE Group, Risk Modeling Director in Freddie Mac, Director of Credit Risk Management in Fannie Mae.

Dr. Chen holds the academic position of adjunct professor at Shanghai Institute of Advanced Finance (SAIF). He also serves as the visiting professor of PKU-Fordham joint PhD program. He previously served as an adjunct professor at Johns Hopkins Carey Business School, where he taught MBA-level finance courses. Dr. Chen’s academic research interests include discrete event modeling, real estate finance and economics, fixed income securities pricing & hedging, consumer behavior modeling, and quantitative risk management.

Dr. Chen writes column articles for several prominent Chinese newspaper and periodicals, including Wenhui Bao, South Reviews Magazine, CAIXIN Media.

Dr. Chen has his BS in EE from Xi’an Jiaotong University, his MS in EE from Shanghai Jiaotong Unviersity, and his Ph.D. in Computational Finance from Robert H. Smith School of Business, University of Maryland at College Park.

Peng Xiong (Featured Speaker)

Mr. Peng Xiong is a well-known global macro investor and the founder of CCER database, one of the most well-known research databases in China. Currently, his main investment and research are on how to make use of the changes in asset prices brought about by the transformation of the public's cognitive paradigm of financial markets to obtain returns, develop macro-factor/mainstream bias models, and monitor the leading indicators of the economic cycle of 25 economies around the world. He developed a comprehensive trading platform and launched "Crouching Tiger Hidden Dragon Trader Training Camp" in 2018 to impart global macro trading skills to portfolio managers and professional traders from many countries. Besides investment practice, Mr. Xiong’s research works were published in academic journals such as Journal of Portfolio Management, China Economic Research, Management World and World Economy.

As a frequent columnist, Mr. Xiong wrote articles for financial media such as Securities Market Weekly, Shanghai Securities News, China Securities Journal, The Banker, Caijing, China Business News, Shanghai Stock Exchange, Observer and Yicai.com. He delivered keynote speeches at Shanghai Stock Exchange, Shenzhen Stock Exchange, Massachusetts Institute of Technology, Stanford University, and major other financial and non-financial institutions. In May 2012, he was interviewed by CCTV to discuss top-down investment methods and quantitative investment. Mr. Xiong obtained a master's degree in economics from China Center for Economic Research, Peking University in 2002.

Wenfeng Wu (Featured Speaker)

Dr. Wenfeng Wu is a professor of finance and the deputy dean for Faculty & Research at the Antai College of Economics and Management, Shanghai Jiao Tong University. His main teaching and research interests are on investments, bond pricing and financial intermediations. Dr. Wu’s research has been published in leading academic journals such as the Journal of Law and Economics, Journal of Corporate Finance, Journal of Banking & Finance.

He has received several research grants from China National Natural Science Fund Committee, Social Science Fund of China Ministry of Education and Shanghai Pujiang Talents Fund. He was recognized as the Youth Changjiang Scholar in 2016 (among the first group receiving the distinction), awarded the Outstanding Youth Science Fund in 2012, and selected as a New Century Excellent Talent of China Ministry of Education in 2008.

Dr. Wu is the executive editor of China Finance Review International, an English academic journal on China finance research. He is associate director of Shanghai Municipal Supervisory Committee for Finance Undergraduate Degree. From 1992 to 2011, he studied at the Department of Computer Science and Engineering, Antai College of Economics and Management of Shanghai Jiao Tong University. He joined Antai when he got Ph.D. degree in 2001. Dr. Wu also has visiting experience at the Robert M. Smith School of Business, University of Maryland, Chinese University of Hong Kong, Hong Kong Polytechnic University. Dr. Wu is a founding member of the China International Risk Forum and the Modern Risk Society.

Xin Chen

Xin Chen is a professor in accounting at Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University.

He received a Ph.D. in finance from University of Minnesota in year 2005 and worked at Antai College of Economics and Management, SJTU from 2006 to 2016. During the period of 2015 to 2016, he was selected by Chinese central government for public services as Assistant Director of Yunnan Provincial Development and Reform Commission. He also had experience in the World Bank, Renmin University of China, Yunnan University, China Europe International Business School, Massachusetts Institute of Technology and Aarhus University.

He mainly conducts empirical research in corporate finance, accounting and capital market, and institutional investors. His research papers were presented in top tier academic conferences and published in various academic journals. He recently focuses academic research interest on vertical interlock of executives in business groups.

He has been teaching courses in finance and accounting for Undergraduate, Master, MPACC, MBA, EMBA and executive education programs, and received various teaching awards and degree thesis tutoring award. He published teaching cases about Chinese capital market on Ivey Case, China Professional Degree Teaching Case and Shanghai MBA Course Case. He also regularly writes column articles for popular financial media in China such as Capital Week, Caixin and Sina Finance, and receives interviews by various television programs.

Fu Jie

Fu Jie, CFA is the General Manager of Caixin Data Technology Co., Ltd. Jie is expert in quant analysis and index investment. Before joining Caixin, Jie was heading structured products business in Financial Markets division, Royal Bank of Scotland (China), where he was responsible for both bond, derivatives and index-linked products. He helped design the bank’s 1st wealth management product after Chinese central bank’s interest rate reform.

Prior to that, Jie was a Vice President based in Singapore and is part of the bank’s Global Macro Trading team, where he priced some of the biggest derivative deals post 2008 financial crisis. Before joining RBS, Jie was a derivative products manager at ABN AMRO Bank, Hong Kong branch, where he started his career as a global management trainee.

Jie graduated from School of Economics and Management, Tsinghua University in 2005, he is a Chartered Financial Analyst and a member of CFA Society of China.

Alex Gansch

Mr. Gansch is Chief Executive Officer and Founder of Gresham Asia Pte Ltd. headquartered in Singapore, a firm with assets under management exceeding US$5 Billion, specializing for the past 11 years in the management of commodity futures investments for institutional investors globally. Mr. Gansch began his commodity trading career in Germany and Switzerland in 1987 with Paul Reinhart AG, one of the world’s largest privately held soft commodity merchants, working within the firm’s offices in Europe, the Far East, Central Asia, and the US before being named President & Managing Director of the Group’s US headquarters in New York in 1997.

He was also Chief Operating Officer of Balmac International, Inc., an affiliate of Balfour Maclaine, formerly a NYSE publicly listed commodity trading firm, before founding Gresham in January 2006. Mr. Gansch holds a Masters degree in International Trade Law from the Singapore Management University.

Jun Wang

Jun Wang is the deputy director of the Finance Department at College of Management and Economics of China Agricultural University, who has been teaching futures courses and instructing Master of Finance as well as the Futures and Security MBA students with passion for many years, working as the Secretary of the Party branch of China Agricultural University MBA Education Center right now. .He is also on the board of China Fund Management Co.,Ltd serving as an Independent Director. Dr. Wang is a Caixin column writer and a contributing researcher of Caixin Insight as well.

Mr. Wang had been a visiting Scholar in Baruch College in New York City, and worked as research director of Center for Futures and Financial Derivative Research in China Agriculture University. He has been one of the Lecturers for Futures Industry Reserve Talents Training Program in Universities of Dalian Commodity Exchange. Dr. Wang had been invited to be a speaker on the 12th China Derivatives Analyst & OTC Derivatives Forum and a panelist for National University Futures Teaching and Talents Training Seminar. His work has been published in journals such as Securities Market Herald, Futures and Financial Derivatives and Journal of Futures Markets among others.

He recently focuses research interest on translating and editing a book named The Cyclope World Commodities Markets as the Chinese Chief Editor.

Tianyang Wang

Tianyang Wang (Tian) is an Associate Professor in the Department of Finance and Real Estate at Colorado State University. Tian earned his Ph.D. from the University of Texas at Austin. He is also a Chartered Financial Analyst (CFA), a Financial Risk Manager (FRM) — Certified by the Global Association of Risk Professionals, and an Associate of the Society of Actuaries (ASA).

Tian’s research spans both theoretical developments and empirical applications primarily in asset pricing, behavior finance, derivatives, and financial risk management. His work has been published in journals such as Operations Research, Risk Analysis, Quantitative Finance, Journal of Empirical Finance, Journal of Risk and Insurance, Journal of Futures Markets, Energy Economics, and Financial Review among others. Tian's research has been supported by several research grants including grants from the Natural Science Foundation (NSF) of China, the Society of Actuaries (SOA), the Casualty Actuarial Society (CAS), and the Enterprise Research Program. He is grateful for numerous best paper awards and honors including the Academic Research Colloquium Best Paper Award by CFP Board Center for Financial Planning and Dean’s Scholars.

Tian has been an invited speaker, session chair and discussant at international and regional conferences. He has actively served on several research and program committees of major academic and professional societies including the Financial Management Association, Southern Finance Association, American Risk and Insurance Association, J.P. Morgan International Commodities Symposium, and Society of Actuaries to assist the development of an active and productive research community. Tian also serves in the leadership group of Modern Risk Society and on the Editorial Advisory Board of China Finance Review International.