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Learning outcomes
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Methodologies for modelling, implementing and estimating energy price processes
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Various numerical techniques for valuing options
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Key techniques for valuing a portfolio of gas storage contracts
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How to analyse a portfolio of gas swing contracts including key features such as minimum bill, make up, carry forward and indexation
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How to maximise the flow of revenues whilst minimising the cost of transportation with respect to all contracts and physical assets under gas network constraints
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Practical experience of industry leading models developed by Lacima
Agenda
DAY ONE
0900 Modelling approaches for storage and swing portfolios
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Single factor models
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Regime switching
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Multi factor models
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Parameter estimation
1000 Overview of numerical techniques
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Analytical approximations
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Monte Carlo simulationy
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Trinomial trees
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Implies trees
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Least squares Monte Carlo
1030 Morning tea and coffee break
1100 Workshop: calibrating models and implementing Monte Carlo simulations
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How to estimate mean reversion parameters
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How to estimate jump parameters
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How to estimate spot volatility
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Implementing Monte Carlo for mean reverting models
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Implementing antithetic techniques
1230 Lunch
1330 Detailed analysis of swing contracts
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Minimum bill
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Make up and carry forward
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Rolling constraints
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Annual contract quantities / daily contract quantities
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Indexation
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Incorporating extra dimensions in the tree
1430 Valuation and risk management
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How to calculate deltas of swing contracts
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Hedging strategies
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How to analyse cash flow distributions for hedged and un-hedged positions
1530 Afternoon tea and coffee break
1600 Workshop: Valuation of swing contracts
1730 End of day one
DAY TWO
0900 Comparison of storage valuation methodologies
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Intrinsic
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Rolling intrinsic
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Portfolio of calendar spread options
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Tree based stochastic dynamic programming
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Least squares Monte Carlo
1000 Detailed examples
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Intrinsic
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Simulation of forward curves in single factor and multi factor
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Rolling intrinsic
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Portfolio of calendar spread options
1100 Morning tea and coffee break
1130 Workshop: Valuing storage using intrinsic and rolling intrinsic methodologies
1230 Lunch
1400 Gas portfolio optimisation: financial and physical
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Challenges in global optimisation
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Gas networks, pipelines and storage facilities
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Linear programming solutions
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Graph theory
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Maximum flow / minimum cost algorithms
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Adding time components for swing and storage
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Practical examples - networks of gas supply, pipelines, storage and power plants
1530 Afternoon tea and coffee break
1600 Workshop: Solving a gas network problem by implementing a minimum cost algorithm
1730 End of day two
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Overview
