Energy Risk Management

Catalog description

The course begins with an introduction to the primary participants in the energy (and commodities) sphere; upstream producers, market-makers/marketers, brokers, and downstream consumers and processors, and how they prioritize risks. The course addresses the qualitative as well as the quantitative aspects of a broad range of physical and financial risk factors. These risks include pricing, corporate compliance and public reporting requirements, transportation issues, environmental obligations, management of emission allowance, renewable energy, and carbon credits portfolios. Further topics include the understanding and use of VAR models and environmental/climate change considerations. Guest speakers from the industry will provide current real-life insights. Quantitative aspects of the course include trading techniques for both physical commodities and financial instruments, including basis trading, swaps, cross commodity hedging, and the trading of various option derivative structures. The course addresses the application of energy derivatives in the areas of finance, planning, credit and risk management for energy producers and consumers. After discussing in detail how and why options are used by energy traders/consumers/producers, the course concludes with a multi-week trading exercise. In this exercise, students trade a paper portfolio of energy equities, commodities, and options.