Energy Markets And Energy Derivatives

A practical guide to the energy industry, developed to enhance your modelling, pricing and risk management techniques

Course Highlights

What I liked the most about this course is the knowledge and experience of the trainer and the intereactions with other delegates. Excellent!

O.C., PricewaterhouseCoopers

A comprehensive update on the recent approaches in modelling energy prices and pricing energy derivatives
A clear understanding of the most popular energy derivative structures and their application in risk management
An in-depth analysis of oil, gas and electricity markets
Numerous hands-on PC exercises using real market data from spot trades and historical data
The latest developments in valuing and hedging real options
The applications of value-at-risk methodologies to the energy industry

For details of the course trainer, please download the course brochure

Booking Information

Dates	Prices	Book This Course	Discount
18 - 20 Feb 2009	£ 2399		-
10 - 12 Jun 2009	£ 2399		-

Course Programme

What I liked the most about this course is the knowledge and experience of the trainer and the intereactions with other delegates. Excellent!

O.C., PricewaterhouseCoopers

ENERGY INSTRUMENTS AND MARKET CHARACTERISTICS

The Structure and Operation of Energy Markets

Overview of oil, gas and electricity markets
Why companies trade
Using energy derivatives to risk manage energy market exposure
Introduction to financial engineering

Characteristics of the Energy Markets

The forward curve
Backwardation/contango
Mean reversion
Seasonality in prices and volatility
Jump diffusion and state transition
Different approaches to spot price modelling

Structures and Applications of Energy Instruments

Forwards
Futures
Options
Asian options
Swaps
Swaptions

PC Exercise: Hedging with futures, options and swaps

Exotic Derivative Products

Structured trading
Spread options
Compound options
Lookback options (fixed and floating strike)
Barrier options
Binary (digital) options

MODELLING AND ANALYSING ENERGY PRODUCTS

Methodologies for Pricing Derivative Products Used in Energy Markets

Analytic models
Numerical integration
Binomial pricing
Tree-based models
Monte Carlo simulation

PC Workshop: Spreadsheet applications for pricing energy derivatives

Spot Price Modelling and Behaviour

Why traditional risk management methods are difficult to implement in the energy markets
Combining mean reversion and jump diffusion
Calibrating a spot price model
Choosing the right model for the instrument
Modelling spreads

PC Workshop: Analysis of different spot price methodologies: estimation of parameters; multiple underlyings; do the models fit reality? Do models fit reality?

Forward Curve Models

Relationship between spot prices and forward curves
Why we may need a separate forward curve model
Principal component analysis

Real Options in the Energy Markets

Introduction to real options

power generation: spark spread model

Weather Derivatives

Weather Derivatives - what are they?
Trading in Weather Derivatives
How to headge Weather Derivatives

RISK MANAGEMENT APPLICATIONS

Defining Risk

Market risk
Strategic risk
Credit risk
Operational risk

Value-at-Risk for Energy Portfolios

Market value-at-risk
- uses and benefits
- assumptions and limitations
Getting started: first steps to a value-at-risk calculation
- identifying risk factors
- observing market data
- preparing datasets
Main approaches to calculating value-at-risk
- parametric (variance-covariance)
- Monte Carlo
- historical simulation
- advantages and disadvantages of each methodology
Applying at-risk methods to energy portfolios

modelling/decomposing common trade types
interpreting the value-at-risk number

PC Exercise: Estimation of volatility and correlations datasets from historical data

PC Workshop: Comparison of the tail of the distribution of portfolio returns under the three different methodologies and for different portfolio compositions

Extending the value-at-risk analysis by performing stress testing and scenario analysis on the value-at-risk portfolio
Cashflow at Risk and Earnings at Risk (CFaR and EaR)