Modelling & Measuring Commodity Risk
26-27 May 2009, Rome

 

Day 1: Tuesday, May 26

8.30-9.00: Registration & Coffee

9.00-9.10: The chairman, Helyette Geman opens the conference

9.10-10.00: Valuation, Hedging and Optimal Scheduling of Hydro Power: From Classical to New Approaches

  • practical example: hydro power at EnBW
  • valuation and optimal scheduling of hydro power: problem statement
  • from classical to new approaches: linear programming versus least-squares monte carlo methods
  • computational challenges
  • comparison of intrinsic, deterministic and fair value
  • influence of price processes on valuation results using the example of swing options


Guido Hirsch, Risk Controller, EnBW Trading

10.00-10.30: Networking

10.30-11.20: Structured and Equity Risks In Commodity Markets

  • Basic Concepts
  • Nature of commodity risk management and main risk management (trading) styles
  • Structured Products in commodity markets
  • Equilibrium relationships and Convergence Trading
  • Structured trading

Krzysztof Wolyniec, Managing Director of Front Office Quant group, RBS Sempra Commodities

11.20-12.10: Storage valuation: the performance of trading strategies

  • Intrinsic and real options valuation of storage
    a. Daily intrinsic, monthly intrinsic or tradable intrinsic
    b. Incorporation of liquidity and trading costs
  • Rolling intrinsic valuation: comparison of different 'rolling' strategies
  • Full option / spot valuation of storage: least-squares Monte Carlo approach
  • Multiple factors in the price simulation model
  • Case study: backtesting results of trading strategies in the NBP market with the Kyos storage model
    Cyriel de Jong, KYOS Consulting 

12.10-13.10: Lunch

13.10-14.00: Crude vs. oil products correlations and trading of these

  • Oil indexed gas/power formula, typical structure and components, Mediteranean and Northwest Europe
  • Underlying liquid and less liquid OTC and Futures markets; major risk components and basis risk with examples
  • Trading in a dynamically changing underlying correlation structure, regime changes with examples
  • Valuation and trading of an ATM call written on an oil-indexed basket

Ioannis Emiris, Senior Trader, EDF Trading

14.00-14.50: Modelling the Electricity Futures Market

We discuss various approaches to model electricity futures and options on these futures. In particular, we provide a two-factor model for electricity futures, which captures the main features of the market and fits the term structure of volatility. The approach extends the one-factor-model of Clewlow and Strickland to a two-factor model and applies it to the electricity market. We will especially take care of the existence of delivery periods in the underlying futures. Additionally, the model is calibrated to electricity futures and options on futures are priced.

Rüdiger Kiesel, Professor, University of Ulm

14.50-15.10: Networking

15.10-16.00: Ten questions to ask of a storage model

At the very least, a storage model should provide an estimate of the expected value of operating a storage facility.  But how do you achieve that value in practice?  If you know how to phrase the questions, a storage model can provide a lot more value than just the single number representing expected profit.

Tristram Scott, Quantitative Energy Models

16.00-19.00: Networking & Walking tour of Rome

19.00: Conference dinner

 

 

 

 

 

 

 

 

Day 2: Wednesday, May 27

9.00-9.50: A green future - Implications of large-scale wind power

  • The use of a fundamental power model to assess value and cost of wind energy
  • Implication of short-term wind uncertainty on spot and imbalance markets
  • Wind intermittency: modelling on the cost of thermal back-up power

Rouven Lüscher, Head of the Quantitative Analysis group, Nuon

9.50-10.40: Model Risk and energy assets management

  • Martingales vs co-integrated forward curve models
  • Hedging with the specifities of energy markets
  • An application to pricing : the case of gas storage capacities
  • Which model for mean term portfolio risk management

Olivier Bardou, Project Manager, GDF Suez

10.40-11.10: Networking

11.10-12.00: Metals and Energy Prices: Back to Fundamentals

  • The Massive Arrival and Rapid Withdrawal of New Entrants in the Commodities World
  • The Forward Looking Picture for Crude Oil and Metals
  • Storage Capacity and Contango in Energy commodity Forward Curves
  • The Uncertain Future of Biofuels and Tar Sands
  • The Perspectives for Share Prices of Oil and Mining Giants and Redistribution of Physical Assets

Hélyette Geman, Director, Finance Commodity Centre, Birkbeck, University of London & ESCP- EAP

12.00-13.00: Lunch

13:00-13.50: Generation Assets Valuation: The practical experience of Iberdrola

  • Quantitative & Fundamental approaches
  • Understanding your assets: Technologies & Market

Julián Calvo, Middle Office, BackOffice & Trading IT Systems Vice President, Iberdrola

13.50-14.40: Co- integration of energy commodity prices (electricity, natural gas, crude oil): Comparing the US and European situations

  • gas, electricity and oil dynamics
  • short term correlation
  • market integration

Rita L. D'Ecclesia, Professor of Applied Mathematics, University of Rome/ Birkbeck College, University of London

14.40-15.10: Networking

15.10-16.00: The increasing uncertainty of prices and ressource availability in the energy industry implies that for the valuation of flexible assets such as gas storages models based on real option approaches are used. When the asset valuation needs to consider path-dependency of the operational decision process, the valuation should be based on scenario tree approaches. In this presentation a scenario tree based approach for the valuation of gas storage is introduced. Exemplary results of the valuation including sensitivity analyses with respect to market price volatility and market liquidity are presented.

Georg Ostermaier, Decision Trees GmBH

16.00-16.15: Closing of the conference


 

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