Energy Trading, Risk Management & Pricing

Introduction

There are unprecedented levels of competition in the energy industry. Energy markets around the world are rapidly being deregulated leading to increased exposure to the prices on commodities, and exposing participants to potentially catastrophic risks.

This course provides a comprehensive and technical angle of the valuation and risk management of energy derivatives, within the oil, gas, and electricity markets, and looks in depth at the trading, pricing and risk mitigation.

It will understudy the intricacies of liberalization of the energy markets, the role of trading business unit, markets & products derivatives, factors that drives market price and financial instruments.

Course Objective

At the end of this course, participants will be able to:

• Evaluate the essentials of energy trading & risk management;
• Recognize the role of trading organisations and the interaction with the internal & external environment;
• Expand the importance of risk management and its position within organisations;
• Acknowledge the role of regulation and the consequences for organisations and their environment;
• Realize the role of accounting rules for trading organisations.

COURSE OUTLINE

MODULE 1: LIBERALIZATION OF THE ENERGY MARKETS

• Aim & consequences of liberalisation
• Risk and return; risk-reward ratio; risk versus uncertainty; qualification versus quantification of risk.
• Market risk – What is it?
• Price risk; hedging; market characteristics, such as location, delivery time/period, time to maturity.
• Risk management
• Identification of risk, measuring risk and control of risk; liquidation, insurance and hedging.

MODULE 2: THE CONCEPT VOLATILITY

• The calculation & interpretation of volatility figures
• Counterparty risk – What is it?
• Credit risk and delivery risk; the consequences of hedging for market risk and counterparty risk.
• Credit risk management
• Clearing; the concept of netting; credit limits; ratings; sleeving; systemic risk and regulation.
• Liquidity & Liquidity risk
• Market liquidity versus funding liquidity; indicators for market liquidity; position limits.

MODULE 3: THE ROLE OF TRADING BUSINESS UNIT

• The trading organisation – Front, Middle & Back Office
• Trading versus procurement and sales; decision making & connectivity; trading tools & data.
• Trading – The order book & Types
• Trading process – Clearing & Settlement
• Trading process – Transaction flow
• Trading process – ETRM system
• Pre-trade, trade and post-trade processes; tasks & responsibilities of front/middle & back office staff.
• The task of energy trading and risk management software; the users and purposes of the tool.

MODULE 4: MARKETS & PRODUCTS

• Markets & Products – Derivatives
• Derivatives financial instruments
• The difference between spot/prompt and forward/futures markets, prices and transactions.
• Contract for difference (CFD)
• Swaps
• Options – Call Or Put Option & Pricing Of Options
• Trading platforms
  • Over-the-Counter (OTC)
  • Brokerage services – role & the differentials between inter-dealer brokers and broker-dealers
  • Exchange trading : Features & Setting Up
  • Trading screens & platforms
• What details are relevant to traders? What is Trayport, how does it work and why do traders use it?

MODULE 5: PRICE DRIVERS, PRICING & INDEXATION

• How do prices arise in the market?
• What factors drive prices?
• What is an index? What is it used for?
• FX markets & trading – the role of the treasury department; currency pairs; exchange rates.
• Accounting
  • Bookkeeping & accounting rules
  • Book structure & Internal transfers
  • Mark-to-Market (M-to-M)
  • Differences & consequences of M-to-M vs. historical cost accounting.
• Terminology related to the value chain
  • Upstream, midstream & downstream
  • Opening & Closing,
  • Concepts of Long & Short
  • Concepts of Bull & Bear

Who Should Attend?

• Corporate Planners, Law Personnel & Negotiators
• Business & Development Managers
• Geoscientists, Engineers, & Refiners
• Bankers, Accountants, Auditors, Equity and Financial Analysts
• Government Regulators, Compliance Officers &Tax & Finance Advisors

Delivery Method: This will include combine lectures, discussions, group exercises, case studies and illustrations. Participants will also understand the theoretical and practical knowledge of the topic.

Venue: London

Fee: Open

Duration: 1 week

Course Date: March 11th – 15th 2024