Advanced Energy Derivatives Hedging and Risk Management - DPH3E 

CPE Credits Awarded: 8
Categories: Trading, Derivatives, Hedging and Risk Management, Global Association of Risk Professionals (GARP) Approved Course

Gold Course

This highly applied and practical course is designed for energy risk practitioners interested in enhancing their knowledge of best practices in valuation, hedging and risk management of derivatives portfolios.

The course builds on the concepts introduced in DPH1 and DPH2 and explores advanced strategies used to price, hedge and manage the risk of derivatives in leading energy trading organizations. Delegates learn about the practical applications of the models and strategies from the point of view of users of those models, not the quantitative developers.

Advanced market risk management topics such as marginal VaR analysis, backtesting VaR models and Extreme Value Theory (EVT) as well as risk risk metrics such as Earnings at Risk (EaR) and Cash Flow at Risk (CFaR) are covered with practical examples.

DPH3 also covers best practices in counterparty risk management. Metrics such as Potential Future Exposure (PFE) and Credit Valuation Adjustments (CVA) are introduced in the context of contract valuation and risk charges.

This highly interactive workshop uses current case studies, Excel exercises and group discussions to reinforce the concepts presented in the lectures.

Recommended prerequisites: DPH1, DPH2

Please note: a laptop and Excel version 2007 or later is required in order to engage in market data.

Not sure if you have the appropriate experience? Click here to test yourself on the knowledge necessary for this course.

Do you have a question or enquiry regarding this course?

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Asia Pacific Europe, Middle East, Africa, Central & South America North America

GARP rgbMennta Energy Solutions is registered with GARP as an Approved Provider of Continuing Professional Development (CPD) credits. Mennta Energy Solutions has determined that this program qualifies for 16 GARP CPD credit hours. If you are a Certified FRM or ERP, please record this activity in your Credit Tracker at

  • Market risk managers
  • Energy traders
  • Trading managers
  • End-users of derivatives in corporations
  • Credit risk analysts
  • Risk consultants
  • Risk and audit committee members
  • CFOs and treasury managers
  • Finance department personnel
  • Compliance managers
  • Middle and back-office personnel
  • Treasurers and treasury analysts
  • Chief risk officers

301: Advanced Market Risk Management for Energy Trading

  • Excel case studies: Review of VaR methodologies
  • Overcoming known problems with VaR models
  • Case study: How to game VaR
  • Marginal VaR analysis: Applications for Hedging and Risk Management
  • Value at Risk using “Greeks” in a simulation environment
  • Backtesting VaR models: Statistical tests
  • Tail “heaviness” and Tail “asymmetry”: Expected Tail Loss (ETL) and other Risk measures.
  • Extreme Value Theory VaR and ETL
  • Integrating stress tests into the tail analysis

302: Earnings at Risk, Cash Flow at Risk and Collateral-at-Risk using Monte Carlo Simulation

  • Forward curve behavior in oil, gas and power markets
  • Review of spot price models: GBM, GBM w/ MR, MRJD
  • Multi-factor and multi-commodity models: Structured Monte Carlo (Cholesky-based) Earnings at risk and cash flow at risk for multiple maturities
  • Margin-at-risk calculation and liquidity risk management
  • Excel Case study: Multi-step Earnings at Risk calculation for an energy producer
  • Case Study: Calculation earnings at risk and collateral at risk with Monte Carlo simulation

303: Counterparty Risk Management

  • Counterparty risk trading in energy trading
  • Current Exposure, Expected Exposure vs. potential future exposure
  • Potential exposure and the role of margin, collateral and settlements.
  • Excel case study: Calculating PFE for Commodity Swaps and Physical Forwards
  • Counterparty Valuation Adjustments (CVA)
  • Counterparty VaR and dynamic potential exposure. Adding default probabilities.
  • Using CVA and PFE to set counterparty limits and credit charges

304: Basis Risk Management and Derivatives in Energy Markets

  • Review of basis Instruments: Basis Swaps and Spread Options
  • Understanding and using correlation in valuation and risk measurement.
  • Pitfalls of correlation as a measure of dependence
  • Short-term correlation vs. long term co-movement (cointegration)
  • IAS 39/IFRS 9 and Hedge Effectiveness. Ex-ante vs. Ex-post Tests.
  • Minimum Variance Ratio using Volatility and Correlation Analysis
  • Case study: Basis risk and hedging instruments
  • Excel Case Study: Analysis of cargo trading and arbitrage strategies using Monte Carlo simulation


DR CARLOS BLANCO is an expert in energy, commodity, and financial risk management and modeling. He has been a faculty member of Mennta Energy Solutions since 2004, where he teaches the Derivatives Pricing Hedging and Risk Management Certificate Programme as well as courses on Counterparty Risk Management and Gas and Power Trading and Risk Management.

He has published over 100 articles on financial, energy, and commodity trading, hedging and risk management. He is the founder and managing director of a risk management advisory firm with clients in North America, Europe, Africa and Asia. Carlos is a former VP, Risk Solutions at Financial Engineering Associates. There, he worked over six years as an essential contributor in the development of the energy derivatives valuation and risk management models of the firm. He also provided leading-edge risk advisory and educational services to over 500 energy and commodity trading firms and financial institutions worldwide. He also managed the world-class support and professional services department within the firm. Prior to FEA, Carlos worked for a hedge fund in the Midwest and an asset management firm in Madrid, Spain. He is a former regional director of the Professional Risk Managers’ International Association (PRMIA).


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Mennta Energy Solutions (formerly The Oxford Princeton Programme, Inc.) is not affiliated with Princeton University, Oxford University, or Oxford University Press.