Risk Management for the Physical / Financial Energy Markets

Excel Focused Technical Skill Development

2 DAY WORKSHOP
(Workshop is not being offered at this time)

Qualifies for CPD and 14 CPE Credits

INTRODUCTION

In response to global shifts in energy consumption, energy markets are undergoing fundamental changes. Financial markets have responded to these changes by developing new financial products and markets.The characteristics of physical energy markets are fundamentally different from financial markets. Although physical energy markets and financial energy markets are closely related, they behave differently. These differences in their characteristics and behavior are substantial, and their effects on price formation and behavior are complex. Both risk mangers and investment managers need to understand what these differences are and how these differences impact both investment decision-making and effective risk management approaches.

Who should attend?

This intensive and interactive training course is designed for practitioners active in energy markets, both the physical market and financial markets. As its primary objective, the course aims to provide a practical understanding of the behavior of energy markets and the risk management implications of physical and financial markets.

What will you get out of this course?

• Gain understanding of the unique risks in the physical energy markets
• Apply complex forward valuation models
• Analyze the impact of fundamental factors on commodity values
• Structure complex derivatives trades for risk management
• Assess the differences in the risks of non-processed and refined products
• Apply financial risk management techniques to physical risks
• Understand the limitations of using financial assets to hedge physical risks
• Estimate VaR for energy commodities

Practical demonstrations of the above will be provided throughout the workshop through interactive Excel spreadsheets that the delegates will be able to use after the course.

COURSE OVERVIEW AND OUTLINE

Due to the informal and highly interactive nature of the course, we ask all delegates to attend the workshop with a laptop computer loaded with Microsoft Excel with Visual Basic and Excel Solver Add-ins.

Introduction to the energy markets

• Trends in the global energy markets
• Physical energy markets – trading hubs
• Financial energy markets – exchanges
• Pricing and transparency
• EXERCISE: Assessing the correlation between different prices

Physical risks in the crude market

• The exploration, transportation, and refinery process
• Refined products
• EXERCISE: Scheduling and delivering

Physical risk in the gas markets

• The exploration and transportation process
• LNG and natural gas markets
• EXERCISE: Converting gas to LNG

Risks in electricity production

• Structure of the electricity industry
• Spot power markets
• EXERCISE: Modeling electricity prices

Spot, forward, and futures crude markets

• Contracts used to hedge crude oil and refined product price risk
• The spreads
• EXERCISE: Valuing the crude value chain

Spot gas markets

• Contracts used to hedge risk in natural gas and LNG
• The impact of basis
• EXERCISE: Valuing the common gas trading contracts

Spot electricity markets

• Electricity derivatives markets
• The spreads
• Market adjustment and reserve capacity
• EXERCISE: Valuing electricity contracts

Integrating risk management using complex tools

• Hedging the risks that can be hedged
• Operational risk assessments
• Limitations of VaR in an energy context
• EXERCISE: Calculating VaR