An Introduction to Energy Derivatives

This introductory course is aimed at the energy professional with little or no knowledge of futures and options. The course focuses on demystifying the terminology and providing participants with a thorough understanding of derivatives in the context of energy markets. In this course we look in at the practical structure and applications of energy derivatives with examples taken from the oil, gas, and electricity markets.
The format for the course will follow our usual highly practical and successful style of alternate sessions of lectures and Excel based computer workshops.

COURSE OUTLINE
Day 1, AM : Introduction to Energy Derivatives I: Futures and Swaps

• Introduction to derivative instruments
• The players in the derivative markets
• The role of the forward curve
• Futures and Forward contracts
• Basis risk
• Swaps - structures and pricing
• Day to day risk management
  

Day 1, PM : Introduction to Energy Derivatives II: Options

• Options terminology and concepts
• Option payoff diagrams
• The Black-Scholes formula
• Understanding the "Greeks" (delta, gamma, and vega)
• Caps, floors, and collars
• Embedded options
• Swing options
• Understanding energy "exotics"
• Introduction to binomial trees
• Introduction to Monte Carlo simulation

Workshops:
Using payoff diagrams,
Using the Black-Scholes formula,
Using Binomial Trees,
Using Monte-Carlo simulation.