Energy Risk Management - Master course

Transcription

1 Energy Risk Management - Master course Instructor: Dean FANTAZZINI Course Objectives: This course introduces master students to the key issues of Energy Risk Management. The structure of the course follows the official syllabus of the 2012 Energy Risk Professional (ERP) designation by GARP, which is the first and only global certification for energy professionals. Considering that the audience will consists of master students in economics, as well as the large size of the ERP program, our master course will focus on the financial and economic part of the program, which covers Financial Products and Valuation (20% of the ERP exam), Modelling Energy Prices (10% of the ERP exam) and Risk Management Fundamentals (15% of the ERP exam). Prerequisites: Students should be familiar with basic concepts of statistics and econometrics, including probability theory, linear algebra, OLS, and Maximum Likelihood, as well as with basic concepts of time series analysis and stochastic calculus for finance. Method of Grading: The final grade will be based on students seminars and participation (10%), an intermediate written exam covering the first part of the course (45%) and on a final exam covering the second part (45%). Total teaching hours: 60 Total students seminars hours: 12 1

2 Course Outline 1. Financial Products and Valuation [28 hours teaching + 6 hours seminars] Forward Contracts and Exchange Traded Futures Steven Errera and Stewart L. Brown. Fundamentals of Trading Energy Futures Options, 2nd Edition (Tulsa, OK: PennWell Books, 2002). Chapter 3: Behavior of Commodity Futures Prices Robert McDonald. Derivatives Markets, 2nd Edition (Boston: Pearson Education, Inc., 2006). Chapter 6: Commodity Forwards and Futures Energy Swaps Chapter 1: Energy Swaps Energy Options Chapter 2: Energy Options Exotic Options Chapter 3: Energy Exotic Options Option Valuation and Risk Management: Chapter 9: Overview of Option Pricing for Energies Chapter 10: Option Valuation Chapter 9: Risk Management of Energy Derivatives Real Option Valuation Alexander Triantis. Handbook of Modern Finance (New York: Research Institute of America, 2003). Available online: %20Finance.pdf Chapter 7: Real Option Valuation 2

3 William Bailey, Benoit Couet, Ashish Bhandari, Soussan Faiz, Sunaram Srinivasan and Helen Weeds. Unlocking the Value of Real Options (Oilfield Review Winter 2003/ Available online: Speculation and Spread Trading in Energy Commodities Steven Errera and Stewart L. Brown. Fundamentals of Trading Energy Futures and Options, 2nd Edition (Tulsa, OK: PennWell Books, 2002). Chapter 4: Speculation and Spread Trading Hedging Energy Commodity Risks Peter C. Beutel. Surviving Energy Prices (Tulsa, OK: PennWell Books, 2005). Chapter 3: Different Kinds of Risk Chapter 13: Energy-Market Hedging Scenarios Steve Leppard. Energy Risk Management: A Non-technical Introduction to Energy Derivatives (London: Risk Books, 2005). Chapter 4: Physical Transactions and Basic Hedging Instruments Weather Derivatives Geoffrey Considine, Ph.D. Introduction to Weather Derivatives. Available online: Kevin Baumert and Mindy Selman. Data Note: Heating and Cooling Degree Days. (World Resources Institute, 2003). Available online: 2. Modelling Energy Prices [12 hours teaching + 3 hours seminars] Introduction to Energy Modelling Chapter 2: What Makes Energies So Different? Data Analysis and Essential Statistics Chapter 4: Essential Statistical Tools 3

4 Spot Price Behavior Chapter 2: Understanding and Analyzing Spot Prices Chapter 5: Spot Price Behavior Forward Curve Modelling Chapter 4: Energy Forward Curves Chapter 8: Forward Model Curves Helyette Geman (ed). Risk Management in Commodity Markets: From Shipping to Agriculturals and Energy (West Sussex, England: John Wiley and Sons, 2008). Chapter 2: Forward Curve Modeling in Commodity Markets Estimating Price Volatility Chapter 3: Volatility Estimation in Energy Markets 3. Risk Management Fundamentals [20 hours teaching + 3 hours seminars] Value-at-Risk (VaR) and Stress Testing Chapter 10: Value-at-Risk Alessandro Mauro. "Price Risk Management in the Energy Industry: The Value at Risk Approach,"Proceedings of the XXII Annual International Conference of the International Association for Energy Economics (June 9-12, 1999). [Paper for SEMINAR] Available online: Jose Ramon Aragones, Carlos Blanco, and Kevin Dowd. Incorporating Stress Tests Into Market Risk Modeling. Available online: Modelling%20-%20a%20paper.pdf 4

5 Credit and Counterparty Risk Management Chapter 16: A Practical Guide to Credit Control and Risk-Mitigation Methods Markus Burger, Bernhard Graeber, and Gero Schindlmayr. Managing Energy Risk: An Integrated View on Power and Other Energy Markets (West Sussex, England: John Wiley and Sons, 2007). Chapter 6.3: Risk Management (Credit Risk) Jon Gregory. Counterparty Credit Risk (West Sussex, England: John Wiley and Sons, 2010). Chapter 2: Defining Counterparty Credit Risk Chapter 3: Mitigating Counterparty Credit Risk 4. Craig Pirrong. The Economics of Central Counterparty Clearing: Theory and Practice. (ISDA Working Paper). Available online: Enterprise Risk Management Casualty Actuarial Society, Enterprise Risk Management Committee. Overview of Enterprise Risk Management. Available online: Chapter 10: Management Controls Chapter 15: Operational Risk and its Management Case Studies in Risk Management Failure Ludwig Chincarini. A Case Study on Risk Management: Lessons from the Collapse of Amaranth Advisors L.L.C. Connecticut Law Review. Risk Management and Corporate Governance: The Case of Enron. [Paper for SEMINAR] Available online: 5