Energy derivatives and energy risk management training is essential amid the monumental changes in today’s energy business.  Energy deregulation has taken a radical turn following the Enron collapse.  Analysis and measurement of risks, both market price risk and credit (non-performance) risk, have become central to all players, measured as Value at Risk, Capital at Risk, Earnings at Risk or Cash at Risk.  Deal structuring for regulated utilities and unregulated players will increasingly focus on trading around energy assets: generation, transmission, and distribution in the power, natural gas and coal sectors; pipelines and wells for crude oil and gas.  This will bring to the forefront the proper application of financial products used in trading and hedging: exchange-traded natural gas futures, crude oil futures, coal futures, together with over-the-the counter swaps, basis trades, and  options.

 Paradigm facilitates transition into this new era, by training managers, line officers, sales staff, traders, accounting, legal and support personnel in the language, technologies and tools of this business culture, enabling an organization to develop a common understanding and vocabulary.  This consistency and continuity of knowledge from the back office through the front office to the executive office enables an organization to better understand, report and analyze the risks and benefits of their trading and marketing activities.

Energy supply contracts as well as energy assets themselves provide extrinsic value because of embedded optionality.  To understand strategies and tactics that trade around these assets and contracts, personnel must understand basic option pricing principles.  Beyond the standard option pricing model (i.e. Black Schoeles et al) energy professionals must grasp more exotic option concepts (spread options, average price options, swaptions, etc.) for these are the type of options found embedded in assets and contracts (spark spreads, basis spreads, fixed transmission rights, index averaging, cancelable/extendible contracts, etc.). Central to understanding option valuation is comprehending the abstraction that is volatility with its complex volatility term structure, volatility skews and volatility smiles.  Energy players also must live with the risks of force majeure, a consideration that alters not only buying and selling strategies, but also the forward price curves that are the starting point not only of options but of all risk management. 

Paradigm training seminars impart a clear understanding of energy derivatives, energy risk management with all the complexities of the contemporary energy market (e.g. locational marginal pricing, multiple-fuel swaps and options, direct and synthetic tolling, trading calendar/time spreads and synthetic storage, exchange of futures for physical, exchange of futures for swaps, triggers trades, swing swaps,  park-and-loan structures, load shaping and load-growth options, and more).  By raising awareness of the benefits and risks of the various products, Paradigm’s seminars create in organizations a firmer footing in managing and reporting their risks and are thus better-positioned to extract value from the market