Advanced Energy Price Risk Management & Hedging

The Energy Price Risk Practitioner Series are designed to provide participants with an understanding of pricing, risk management, asset valuation and derivatives within the energy markets.

“Advanced Energy Price Risk Management & Hedging,” permits a deeper but still accessible analysis of issues covered in the first module, including methods and analyses, as well as extensions into additional areas of price risk assessment and management.

For example, the “Advanced” module permits understanding the relationship between crude-oil prices and inflation, the optimization of risk management at the corporate level, a deeper understanding of volatility, extrapolation of longer-dated futures prices (for valuation of long-dated assets) and additional measures of Value-at-Risk.

Key Takeaways

• Use financial models to analyze and forecast energy prices; extrapolate forward prices beyond the liquidity tenor
• Understand the risk of and return from futures and options contracts on energy commodities
• Manage and optimize their corporations’ energy risk exposure
• Estimate and calculate volatility in energy prices
• Apply option valuation techniques to the energy markets
• Understand and use derivative products to mitigate energy price risk; use structured products to enhance firm value; understand exotic structures unique to oil (e.g., average option) and gas and power (e.g., swing options, weather derivatives)
• Utilize real options theory to value energy assets; use information from futures/option prices to make optimal production decisions: Optimal timing for extraction, optimal rate at which to extract oil (gas) from a field; value oil fields, pipelines and storage facilities, power plants
• Apply Value-at-Risk to the energy industry