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Course Level
Intermediate
Delivery Method
Classroom Instructor-Led Course
Professional Development Credit Hours
16
Pre-requisites
Recommended: Introduction to Derivatives Markets, Hedging and Risk Management or equivalent knowledge.

"The course was very informative.   I liked that we spent the time to go through the building blocks before diving into more complicated examples.   I also liked the hands-on method of engaging the material in excel." Elbow River Marketing


Faculty

Dr. Carlos Blanco is a financial risk management expert with over 20 years of diverse experience in energy markets. He has worked with some of the largest energy and commodity market firms worldwide providing educational, advisory services and software solutions.

He is the managing director of analytic solutions for Ascend Analytics. He has advised risk groups and senior management in oil, gas, power, mining and trading firms on various matters related to the risk management process including risk policy, hedging strategy, risk model development and validation, risk appetite and risk metrics.

Dr. Blanco is an active faculty member for Mennta Energy Solutions since 2004, and he has conducted a wide range of energy derivatives hedging, pricing and risk management seminars worldwide. A frequent conference speaker and writer, he has coauthored over 150 articles for Energy Risk Magazine, Commodities Now, Energy Metro Desk, Oil and Gas Journal and others.

He is a former VP Risk Solutions at Financial Engineering Associates, Inc (a MSCI/BARRA Company), where he managed the market risk suite of products as well as the firm's product support and professional services group. He also taught finance at the University of California, Berkeley, and the ABN AMRO Academy. He is a former VP Risk Solutions at Financial Engineering Associates, Inc (a MSCI/BARRA Company), where he managed the market risk suite of products as well as the firm’s product support and professional services group. He also taught finance at the University of California, Berkeley, and the ABN AMRO Academy. Dr. Blanco was recently awarded the GARP Sustainability and Climate Risk (SCR) certification.


Accreditations

NASBA: Mennta Energy Solutions is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its web site: www.nasbaregistry.org

CPD Certification Services: The CPD Certification Service works with Mennta Energy Solutions to ensure valuable knowledge is structured to complement the universal guidelines of Continuing Professional Development. Mennta Energy Solutions courses are approved by CPD at one credit per training hour.

BAC: Mennta Energy Solutions is pleased to be endorsed by the BAC for Independent Further Education as a Short Course Provider. Endorsement covers courses delivered in the UK only.

GARP: Mennta Energy Solutions is registered with GARP as an Approved Provider of Continuing Professional Development (CPD) credits.

Intermediate Derivatives Markets, Hedging and Risk Management (CLASSROOM) - DPH2


Course Schedule

Date Time Location Price* Registration Deadline**
16-17 June 2022
Register
9:00am-5:00pm
Calgary, AB
$ (USD)2,620.00
6 May 2022

*Prices do not include VAT, GST, or any other local taxes. All applicable taxes will be added to the invoice.
**Please register by the deadline to help us ensure sufficient attendance and avoid postponing the course.


Course Summary

The Intermediate Derivatives Markets, Hedging, and Risk Management is a two-day class presented by the energy training experts at Mennta Energy Solutions. This is an intermediate course for professionals interested in improving their knowledge of energy derivatives hedging and risk management.

The course provides an overview of energy price behavior, and applied probability and statistics using Excel exercises with hands-on calculations. After introducing the building blocks of risk analysis, multiple exercises show how to calculate volatilities, correlations, Value at Risk and other risk metrics.

Delegates explore some of the main tools to manage and report market risk in energy portfolios such as VaR, Stress Tests and Backtesting. Various hands-on case studies show the step-by-step calculations for variance-covariance, Monte Carlo and Historical Simulation VaR for energy portfolios.

The course also covers derivatives instruments for basis risk management such as basis swaps and spread options and the use of correlation and regression to identify and measure basis risks. Case studies show to hedge in illiquid markets using proxy hedges.

The use of option strategies such as costless collars, 3-way collars, straddles and structured products is shown in an applied context, with emphasis on benefits and limitations in comparison to other hedging instruments.

The main option 'Greeks ' (Delta, Gamma, Vega and Theta) are also presented using practical exercises and main uses.

Please note: a laptop and up-to-date version of Office would be an advantage in order to engage in market data; however it is not essential.


Who Should Attend?

  • 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

Course Content

Day 1:

Course Introduction

201: Review of Energy Price Behavior, Probability and Statistics

-       Overview of energy price behavior; seasonality; mean reversion; spikes
-       Volatility structure in energy markets; spot vs. forwards
-       Probability distributions; moments of a distribution, histograms and QQ plots.
-       Excel exercises with hands-on calculations of volatilities, correlations
-       Introduction to Monte Carlo simulation in Excel using normal distributions
-       Case study: VaR calculation for a single exposure.
-       Calculating and interpreting rolling window volatilities and correlations in Excel

202:   Market Risk Management for Energy Trading (I)

-       Best practices of market risk management in energy markets
-       Market risk policies and procedures: Key components and effective oversight
-       Case study: interpretation of market risk disclosures for large energy firm
-       Understanding VaR and Expected tail loss (ETL)
-       A simple way to calculate VaR: Top Down Approach
-       Risk limits and risk reports
-       Backtesting market risk models
-       Oil, power and gas specific issues

203: Market Risk Management for Energy Trading (II)

-       VaR methodologies
-       Choice of confidence level and horizon
-       Excel Case Studies for energy portfolios
            - Analytic or Variance Covariance VaR.
                  - Review of Matrix Multiplication in Excel
            - Monte Carlo Simulation
                  - Geometric Brownian Motion
                  - Simulating correlated market prices
            -Historical simulation
-       Comparative Analysis of VaR methodologies

204: Stress Testing and Backtesting   for Energy and Commodity Firms

-       Designing and conducting stress tests for energy portfolios
-       Benefits of stress tests
-       Standard & Poors liquidity risk survey and Stress Testing
-       Integrating stress tests in the risk modeling process
-       Reverse stress tests for energy portfolios
-       Stress tests for crude and products; gas; electricity
-       Exercise: Creating and presenting stress test reports

End of Day Summary

Day 2

205. Analysis of Derivative Strategies

-       Review of key option concepts.
-       Zero-cost collars. Uses and misuses.
-       Case Study: Using Zero Cost Collars in a Hedging Program
-       Call and Put spreads. Main uses.
-       Three-way Collars: Aggressive vs. Conservative strategies
-       Volatility Plays: Straddles and Strangles
-       Comparing the risk and benefits of various hedging strategies

206: Understanding option sensitivities through the "Greeks"

-       Review of Black-76 and valuation of options
-       Option Greeks: Definition, calculation and main uses
-       Sensitivity vs. Price: Delta and Gamma
-       Volatility exposure and Vega
-       Theta and time decay.
-       Case study: calculating and visualizing "Greeks" in Excel
-       Delta hedging of option portfolios; key considerations
-       Analyzing the dynamics of delta, gamma and vega for a straddle position
-       Taylor series expansions and the use of Greeks to conduct P/L decomposition
-       Case Study: Identifying price and volatility views using P/L decomposition

207: Basis Risk Management and Derivatives in Energy Markets

-       Types of basis risk
-       Managing basis risk with basis swaps
-       Case study: Managing NYMEX/ICE basis risk with OTC basis swaps
-       Hedging with futures and basis swaps
-       Understanding and using correlation in valuation and risk measurement.
-       Optimal hedge ratio: Calculations, uses and limitations
-       Case study: Spread option valuation and Greeks
-       IAS 39/IFRS 9 and Hedge Effectiveness. Ex-ante vs. Ex-post Tests.
-       Managing basis risk with Exchange of Futures for Physical (EFP),

208: Integrated market risk management case study

-       Market Risk metrics: Review of VaR methodologies.
-       Excel case study: Comparative Analysis of VaR methodologies for sample portfolio
-       VaR for option portfolios using simulation vs. delta-normal method
-       Hedging and Risk calculations for portfolios with basis exposures with futures, swaps and basis swaps
-       Best hedges and trade risk profiles

Course Wrap

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