Session 1:

Prices and Indices

• Differences between energy markets and traditional financial markets

• Energy Exchanges: ICE, NYMEX, etc.

• Role of indices

• Futures markets and Price discovery

• Different energy markets: Oil, Natural Gas, Electricity, Emissions, Freight, Coal

• Formula based pricing

• The way the market quotes

• Average nature of forward curves

• Importance of Spreads

Session 2:

Instruments

• Forwards, Futures, Swaps

• Asian options, Swaptions, Spread options, Basket Options

Session 3:

Price Dynamics of Spot and Forward Prices

• Spot Price Behaviour (Mean reversion, Seasonality, Mean reversion and jump diffusion)

• Role of the forward when trading

• Storage and the convenience yield

• Shape of the forward curve and relationship with spot prices

• Principal component analysis

• How should we interpret the current bull run?

Session 4:

Volatility

• Term structure of volatility

• Seasonality in volatility

• Effect of stock on volatility

• Volatility Smile and inverse leverage

Session 5:

Correlations and Spreads

• Term structure of correlations

• Understanding and exploiting correlations

• The way markets develop; standardization and liquidity

• Spreads in pricing

• Modelling spreads

• Pricing relative to other instruments

Session 6:

Risk Management

• Defining objectives

• Single versus multiple horizon models

• Market risk

• Credit risk

• Earnings-at-risk

• Risk in commodity finance

• Problems with data and calendars

• Identifying risk factors

• Limitations of traditional risk management methods

Session 7:

Commodities as an Asset Class

• Correlation between commodities and traditional asset classes

• The main commodity indices

• Construction of indices

Course Close