#### Course Description

Energy Markets & Energy Derivatives Enhance your modelling, pricing and risk management techniques. Your Comprehensive Course Programme ENERGY INSTRUMENTS AND MARKET CHARACTERISTICS The Structure and Operation of Energy Markets ? Overview of oil, gas and electricity markets ? Why companies trade ? Using energy derivatives to risk manage energy market exposure ? Introduction to financial engineering Characteristics of the Energy Markets ? The forward curve ? Backwardation /contango ? Mean reversion ? Seasonality in prices and volatility ? Jump diffusion and state transition ? Different approaches to spot price modelling Structures and Applications of Energy Instruments ? Forwards ? Futures ? Options ? Asian options ? Swaps ? Swaptions PC Exercise: Hedging with futures, options and swaps Exotic Derivative Products ? Structured trading ? Spread options ? Compound options ? Lookback options (fixed and floating strike) ? Barrier options ? Binary (digital) options MODELLING AND ANALYSING ENERGY PRODUCTS Methodologies for Pricing Derivative Products Used in Energy Markets ? Analytic models ? Numerical integration ? Binomial pricing ? Tree-based models ? Monte Carlo simulation PC Workshop: Spreadsheet applications for pricing energy derivatives Spot Price Modelling and Behaviour ? Why traditional risk management methods are difficult to implement in the energy markets ? Combining mean reversion and jump diffusion ? Calibrating a spot price model ? Choosing the right model for the instrument ? Modelling spreads ? How many underlying instruments should we model? PC Workshop: Analysis of different spot price methodologies: estimation of parameters; multiple underlyings; do the models fit reality? Do models fit reality? Forward Curve Models ? Relationship between spot prices and forward curves ? Why we may need a separate forward curve model ? Principal component analysis Real Options in the Energy Markets ? Introduction to real options ? power generation: spark spread model Weather Derivatives ? Weather derivatives ? what are they? ? Trading in Weather Derivatives ? How to hedge Weather Derivatives PC Workshop: Modelling Weather Derivatives RISK MANAGEMENT APPLICATIONS Defining Risk ? Market risk ? Strategic risk ? Credit risk ? Operational risk Value-at-Risk for Energy Portfolios ? Market value-at-risk ? uses and benefits ? assumptions and limitations ? Getting started: first steps to a value-at-risk calculation ? identifying risk factors ? observing market data ? preparing datasets ? Main approaches to calculating value-at-risk ? parametric (variance-covariance) ? Monte Carlo ? historical simulation ? advantages and disadvantages of each methodology ? Applying at-risk methods to energy portfolios ? modelling/decomposing common trade types ? interpreting the value-at-risk number ? Comparing the tails of the distribution of portfolio returns under the three different methodologies and for various portfolio compositions Case study: Estimation of volatility and correlations datasets from historical data PC Workshop: Comparison of the tail of the distribution of portfolio returns under the three different methodologies and for different portfolio compositions ? Extending the value-at-risk analysis by performing stress testing and scenario analysis on the value-at-risk portfolio ? Cashflow at Risk and Earnings at Risk (CfaR and EaR)

Energy Markets & Energy Derivatives Enhance your modelling, pricing and risk management techniques. Your Comprehensive Course Programme ENERGY INSTRUMENTS AND MARKET CHARACTERISTICS The Structure and Operation of Energy Markets ? Overview of oil, gas and electricity markets ? Why companies trade ? Using energy derivatives to risk manage energy market exposure ? Introduction to financial...