Energy Derivatives

This two day course offers a thorough introduction to the energy markets and sector specific derivatives and their pricing. The course is designed to cover all areas of the energy derivatives market including oil, natural gas, coal and electricity. It will also cover the carbon markets and emissions trading.

Available for in-house delivery. Call +44 (0)1483 573150
Duration: Two days (9.00am to 5.00pm)
Location: In-house
Trainer: Stephen Aikin
Please contact us for a quotation

Day 1

Energy Pricing and Derivatives

+ The different types of energy and energy markets
+ Energy market drivers
+ Market users and participants
+ Spot and Forward pricing
+ Forward curves, limitations of forward pricing and the changing shape of the forward curve
+ Calculating the convenience price and yield
+ Energy derivatives – Delta One: Futures; Pricing an energy swap; Take or Pay contracts
+ Energy derivatives – Options: Option valuation using Blacks'76; Energy exotics – Asians, Spread and Swing; Energy Caps, Floors and Collars
+ Workshop – Energy Derivatives Applications

Oil Markets and Derivatives

+ Introduction to oil – world reserves and production
+ Crude types – sweet n' sour, Heavy n' light.
+ Marker crudes and benchmark pricing: WTI; Brent – Dated Brent, Brent forwards, using CFD's to hedge the basis; Dubai
+ Differential Swaps and spreads: Pricing a differential swap
+ Crude oil price drivers
+ The refining process and distillates markets.
+ Refining netbacks
+ Pricing a Crack Spread
+ Crack curves and using Cracks as distillate stock level predicators
+ Workshop – Energy swaps pricing

The Coal Markets

+ Coal types and uses
+ Demand versus supply and reserves
+ Coal Pricing – International and USA
+ Coal price drivers
+ The coal market in 2008
+ Coal pricing and freight costs
+ Trading coal
+ End of Day Quiz

Day 2

Natural Gas Markets and Derivatives

+ Natural Gas types
+ Gas market supply and demand: reserves and consumption
+ Gas market drivers
+ Transporting Gas
+ The US Gas market: US Gas pipelines and Hubs; Market center(Hub) services
+ Delivery basis
+ Natural Gas basis swaps and spreads
+ Workshop – Natural Gas Swaps
+ The UK Natural Gas market: UK Gas network, pipes and beaches; OCM trading; The European Gas market
+ Natural Gas Storage: Storage media
+ US Gas Storage, Easington Rough UK
+ LNG
+ NGL and Fractionation spreads: Calculating the shrink

Electricity Markets

+ Introduction to Electricity
+ Electricity market structure.
+ The electricity markets: Nord Pool
+ UK Electricity market
+ Electricity price drivers
+ Electricity derivatives: forwards, swaps, spreads and options
+ Electricity forwards
+ Spark and Dark spreads
+ Calculating Spark and Dark spreads
+ The adjusted (clean) Spark spread

Carbon Markets and Emissions Trading

+ Greenhouse gases and the Carbon markets
+ Climate change history
+ The Kyoto Protocol
+ Emission Trading Schemes: EU ETS Phase I; EU ETS Phase II & III
+ Clean Development Mechanisms
+ Joint Implementation
+ US Compliance Schemes
+ Power and Emissions Workshop
+ End of Day Quiz
+ Voluntary Schemes: The Climate Exchanges
+ Trading Carbon Emissions: The shape of the EUA and CER forward curves;
The EUA basis; EUA/CER spreads
+ Correlations with fuels
+ Emissions swaps