An Introduction to Energy and Commodity Finance
21-23 September 2009, Rome

 

DAY 1: September 21

 9:00 - 11:00 ENERGY AND COMMODITY MARKETS
- Physical goods vs. financial securities
- The matrix of risk sources
- Examples of energy markets: Oil, gas, electricity
- Examples of commodity markets: gold, metals, shipping freights

11:15 - 12:45 BASIC ENERGY CONTRACTS
- Mark-to-market value of load deals
- The difference between spot, futures and forward prices
- Convenience yield and the cost of carry
- Examples of commodity futures strategies

14:00 - 16:00 ENERGY DERIVATIVES
- Pricing energy forwards and commodity swaps
- How to build derivative structures involving futures and swaps
- How to define and negotiate a risk profile with options
- Case-study: Simulating the P&L of energy portfolios

16:15 - 17:45 MODELLING PRINCIPLES
- Mean reversion and seasonality
- Framework 1: spot - convenience yield models (Gibson-Schwartz)
- Framework 2: forward curve models (Jamshidian)
- Case-study: periodical Principal Components Analysis

DAY 2: September 22

 9:00 - 11:00 CROSS-COMMODITY DEPENDENCE
- Linear correlation and its pitfalls
- Copula functions and dependence measures
- Estimation of a parametric copula function
- Simulation of multi-commodity price dynamics
- Case-study: Dynamic copula model for the spark spread

11:15 - 12:00 HEDGING ENERGY FLOW ASSETS
- Flow pattern hedging using static forward strategies and optimal hedging time
- Case-study: Tariff, VaR risk and hedging ratio for a load-serving contract

12:00 - 12:45 ECONOMETRIC MODELLING OF ENERGY PRICES    
- Spot price modelling and estimation      
- Main feature for a pricing model      
- how to calibrate a theoretical model       
     
14:00 - 16:00 PRICING MODELS IN PRACTISE
- Combining mean reversion and jumps   
- Adding a load forecast and correlation
- Case-study: calibration for the oil and electricity prices using Excel
- Case-study: calibration for the electricity prices using Matlab

17:00 Tour of Rome
20:30 Dinner

 



 

 

 

 

DAY 3: September 23

9:00 - 11:00
HEDGING USING ENERGY DERIVATIVES
- Hedging price spreads: Spread options
- Spark and crack spread options  
- Hedging volume risk: weather derivatives    
- Hedging average prices: Asian-style options      

11:15 - 12:45
RISK MEASUREMENT AND MANAGEMENT APPLICATIONS   
- Risk classes I: Market and credit risk
- Risk classes II: Strategic and operational risk
- Measuring financial risk in practise       
- Market assessment of Value-at-Risk      
 
14:00 - 16:00
MEASURING AND MANAGING RISK
- Alternative operational approaches for computing Value-at-Risk
- Examples: parametric, Monte Carlo and historical simulation
- Measuring volatility and correlation     
- How to hedge energy positions using derivatives 

16:15 - 17:45
ADVANCED METHODS FOR MANAGING RISK
- Correlation and Co integration as a key measure to manage energy price risk
- Case-study: correlations and co integration for energy commodity prices

 

 

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