North American Gas and Power Trading and Risk Management

Day 1

101: Overview of Gas and Power Markets (I): Main players, market structure, and drivers

–    Overview of the Physical and Financial Gas and Power Markets
–    Market Hubs, Exchanges and OTC markets
–    Risk dimensions: Price, basis, volume, regulation, weather, operations
–    Long or short? Volumetric and Financial Considerations
–    How are gas and power bought and sold?
–    Gas markets: Supply and demand drivers
–    Power markets: Supply and demand drivers
–    Impact of increasing renewable penetration on power and gas markets
–    Case Study: Power and Gas Market response to supply and demand shocks

102: Overview of Gas and Power Markets (II): Spot Prices, Basis, Forward Curves

–    Spot and Forward Prices for Gas and Power
–    Forward curve analysis for gas and power markets
–    Case study: Forward curves vs. Price Forecasts
–    Shaping the forward curve: Bullets, Trading Packages and Shaping Factors
–    Dealing with illiquid hubs and long term maturities
–    Understanding energy price behavior and its volatility structure

103: Gas and Power Physical and Financial Instruments (I): Physical Contracts and Linear Instruments

–    Physical purchase and sale contracts: Fixed Price, Index Price and Basis Deals
–    Main Types of Derivatives: Futures, Forwards, Swaps and Options
–    Exchange-based and OTC trading
–    Open Interest, Bid-ask Spreads and Volume
–    Clearing, collateral and margin issues
–    Swaps (Fixed-for-Floating), Basis Swaps
–    Futures vs. Swaps. NYMEX ‘look-alike’ Forwards
–    Hedging Physical Purchases and Sales with Forward, Futures and Swaps

104: Gas and Power Physical and Financial Instruments (II) -  Options

–    Options and Strips of Options
–    Using Energy Options: Hedging and Speculation
–    Options types and payoffs
–    Average Price (Asian) Options
–    Understanding optionality and contract components
–    Implied price and implied volatility views in option strategies
–    Gas Hedging with Swaps vs. Options
–    Case Study: Daily Options vs. European Options vs. Asian Options
–    Case study: Optionsellers.com and the risk of selling natural gas options (NEW)

105: Mark to Market, P/L and Position management

–    Front, Middle and Back Office
–    Mark to market vs. Mark to Model
–    Bid-ask spreads in Gas and Power transactions
–    Introducing the Liquidity Dimension
–    Setting up reserves for illiquid positions
–    Profit and Loss decomposition for a trading book
–    Case study: Pricing a Natural Gas swap. Step by step calculations
–    Case Study: Assigning liquidity levels to an energy derivatives book

Day 2

201: Trading Strategy and Technical Analysis

–    Market Psychology and Technical Analysis
–    Line Charts, Bar, and Candlestick Charts
–    Identifying Trends, Support, Resistance
–    Commonly used indicators: Moving Averages, MACDs, RSIs, Bollinger Bands
–    Backtesting Trading Models
–    Commitment of Trader Reports: Hedgers, Money Managers and Market Makers (NEW)
–    Integrating Fundamental and Technical Analysis
–    Case study: Using Fundamentals, Technicals and Algorithmic Trading in different market environments
–    Elements of a Trading Strategy

202: Market and liquidity Risk Management (I)

–    Market risk measurement and reporting
–    Understanding and interpreting “at-Risk” measures:
    –    Value at Risk, Earnings at Risk (EaR), Cash Flow at Risk (CFaR)
–    Sensitivity analysis and Stress Tests
–    Market Liquidity vs. Funding Liquidity Risk
–    Trading Limits: Stop Loss, VaR/EaR limits, Volumetric and Counterparty Limits
–    Risk adjusted performance (RAROC)

203: Hedging Strategy and Key Risk Indicators (KRI)

–    Hedging and Trading Philosophy and Policy
–    Tenor and Volume Decisions
–    Key dimensions in hedging: Market, Credit, Liquidity, Accounting, Regret
–    Analysis of hedging strategy of producers and end-users in gas and power markets (NEW)
–    Common hedging mistakes and prevention methods (NEW)
–    Case study: Alternative hedging programmes: Pros and Cons

204: Gas and Power Physical and Financial Instruments (III):  Physical Assets and Contracts as Real Options

–    Physical Assets as Real Options
–    Pipeline capacity: Using basis swaps to hedge transportation and transmission
–    Financial Transmission Rights (FTR) and Congestion Revenue Rights (CRRs)
–    Natural Gas Storage and Calendar Spread Strategies
    –    Optimization based on Intrinsic Value
    –    Re-optimization
–    Battery Storage and trading strategies (NEW)
–    Monetization of Real Options

205: Gas and Power Physical and Financial Instruments (IV): Cross-Commodity Instruments and Real Options

–    Hedging Physical Asset and Contractual exposures
–    Spark Spreads and Heat Rate Forwards and Options
–    Case Study: Generation Assets as real options.
–    Modeling renewable generation: Solar and Wind (NEW)
–    Monetization of the optionality in Generation Assets

Day 3

301: Market and Liquidity Risk Management (II)

–    Position Management for portfolios with assets, physical contracts and financial instruments
–    Exposure Maps and Front-month Equivalent positions
–    Overview of main VaR methodologies: Variance-Covariance, Historical Simulation, Monte Carlo Simulation
–    How to Game “at- Risk” limits
–    Backtesting market risk models
–    Case Study: Analysis of Amaranth’s Natural Gas calendar spread trading strategy

302: Greeks, Option Strategies and Volatility

–    Zero Cost Collars and Three Way Collars
–    Extendable and Participating Swaps
–    Energy option ‘Greeks’: uses and limitations
    –    Case Study: Explaining P&L changes with “Greeks”
–    Straddles and delta-neutral strategies
–    Tips for negotiating with derivatives counterparties
–    Common Derivatives Pricing mistakes and how to avoid them.
–    Implied volatilities, Volatility skews and volatility surfaces
–    Case Study: Bank of Montreal Natural Gas Options Book
 
303: Volumetric Risk and Weather derivatives

–    Key sources of volume risk in gas and power markets
–    Volumetric risk and Operational Risk:
–    Unplanned Outage Insurance
–    Volumetric risk in hydro, wind and solar generation (NEW)
–    Case study: Hedging storage contracts and operational risk
–    Possible problems when hedging physical exposures with financial forwards
–    Hedging Volumetric Risk: Weather Derivatives and Multiple-trigger contracts
–    Prepayment deals and force majeure

304: Counterparty Risk Analysis

–    Key issues in credit risk management for Gas and Power Markets
–    ISDA agreements: Netting, Collateral and Credit Triggers
–    Other Credit Risk mitigation tools: Prepayments, Letters of Credit, Credit derivatives
–    Novation and OTC Clearing
–    Market Based Default Probabilities: Bond Markets and Credit Default Swaps
–    Current Exposure and Walk Forward Analysis of Credit Exposures
–    Credit Exposures and Potential Future Exposure Modeling

305: Regulatory Risk Management and Compliance

–    Regulatory risk management and compliance in energy physical and financial trading
–    Identifying potential regulatory risk ‘red flags’
–    A practical framework for analysis of market manipulation
–    Case study: FERC enforcement case against BP for alleged market manipulation
–    FERC market manipulation cases
–    Proactive compliance monitoring techniques
–    Effective exception reporting and intervention