Download Brochure

Energy Markets And Energy Derivatives

A dynamic course that will help develop practical skills for trading and risk management in the energy markets. 

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
27 - 29 Sep 2010
£ 2399
Book the course now.
-

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  

Technical Analysis for the Energy Markets

  • Overview of oil, gas and electricity markets
  •  Bar and candle charts
  • Candle patterns
  • Support and resistance lines
  • Trend lines
  •  Moving Averages (Simple, Exponential and Hull Moving Average)
  • Moving average crossover
  • MACD, RSI and Bollinger Bands
  • Elliott Wave Theory

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

Specialised Trading Products

  • Structured trading
  • Asian options
  • Special purpose EFTs (e.g. DXO)
  • The volumetric Swing Option (take or Pay)

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
  • How many underlying instruments should we model?

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

PC Workshop: Modelling 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
  • Comparing the tails of the distribution of portfolio returns under the three different methodologies and for various portfolio compositions

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) 

Credit Risk for Energy Companies

  • Elements of credit risk
  •  PD, LGD, EAD
  • Using the CreditRisk+ application 

Trading Volatility as an Asset Class

  • OVX - the "oil VIX"
  • Examples of volatility trading in the energy markets