Energyforum
New to Trading and Risk Management on the European Power Market
4-5 December 2008, Prague
Day 1: Market structure and risk management
Morning session: Jerry de Leeuw
8:30-9:00 Registration
Explanation of the physical markets
" Physical flows
" Transport problems
" Who are the players?
" Difference between brokers, traders, dealers, market makers, liquidity providers, marketers and wholesale energy merchants
10:30-11:00 Coffee & Tea
Explanation of the financial markets
" Exchanges and the OTC market
" Market participants and their role
" Arbitrage
" Trading (propriety trading vs. portfolio trading/optimization)
" Financial products (dark, spark, crack spreads and their clean versions, futures, options)
Connection between physical and financial markets
" Development: integration results in overlap
" Market coupling
12:30-13:30 Lunch
Afternoon session: Jerry de Leeuw
Introduction to risk management
" Physical vs. financial trade
" Liquidity risk
" Currency risk
" Credit risk
" Market risk
" Transport risk
" Weather risk
" Geo-political & regulatory risk
15:00-15:30 Coffee & Tea
" Value at Risk (VaR)
" Hedging tools & strategies
" Derivatives
˘ Forwards/Futures (versus spot trading)
˘ Options (protection: caps & floors)
˘ Swaps
˘ Weather derivatives
" Agreements & conditions
" Collateral & margin
" Volatility
" Skew
" Forward curves
" Backwardation
" Contango
17:00 Wrap up of the day
Day 2: Risk Management through Exchange trading
Morning session: Ekkehard Will
9:00 Session starts
Introduction to European Energy Exchange "EEX"
" History
" Stucture of the exchange/legal side
" Exchange trading versus bilateral trading
Spot trading at EEX
Day Ahead Trading
" Hourly Power Auction
" Price Determination (the market clearing price)
" Process of trading
Intraday trading
"Continuous Trading incl. OTC Trading
"Price determination
"Process of trading
10:30-11:00 Coffee & Tea
Derivatives trading at EEX
" Financial and physicla Futures contracts
" Options contracts
" Trading mechanism incl. OTC Trading
" Price determinations
" The trading system
The Clearing Services at EEX by European Commodity Clearing AG
" Introduction (ECC as Central Counterparty)
" Physical settlement
" Financial settlement (Margining Spot & Derivatives)
12:30-13:30 Lunch
Models for the power price
Afternoon session: Henrik Specht
Market structure in Power markets
" fundamental spot - price determinants in power markets
" interrelation between spot- and term- market
" the impact of wholesale prices in the value-chain for power
" adding other relevant market segments
Models for the Power Price
" Why modelling the power price?
" typical modelling approaches
" back- and side testing of models
15:00-15:30 Coffee & Tea
Valuation of Flexibilities
" simplified option backgrounds
" applying price simulation models for valuation purposes
" the need of numbers beside the "risk neutral fair value"
Applied Risk Measurement
" finding your (company's) risk aversion
" the impact of hedging on your portfolio
" portfolio steering by limit systems
17:00 Wrap up and closing of the course