This course is an introductory program designed to provide participants with the base line knowledge and skills needed to apply derivatives to managing energy risk.  The objective of the session is to provide participants with a practical understanding of the basic energy derivative products that are traded and structured today, with a focus on the natural gas and power markets. 

The program begins with an overview of the forward price curve, the foundation for pricing both derivative and physical products.  The emphasis is on how energy markets differ from non-energy markets.  These distinctions have profound implications for pricing and deal structuring.  Instruction progresses from there with in-depth discussions and analysis of swap and option products with an emphasis on energy industry applications. 

There are no prerequisites for this program, nor is any advanced preparation required.  A basic understanding of the natural gas and/or power markets is helpful. 

At the conclusion of Applied Energy Derivative, participants will be able to:

ü      Understand the objectives and benefits of hedging for a company. 

ü      Develop a forward price curve, using a benchmark curve with adjustments for contract terms, quality, location and swing.

ü      Utilize the price curve to reduce the cost of storage.

ü      Define basis and demonstrate how it represents risk to a hedger.

ü      Structure a swap to manage risk separately from physical risk.

ü      Price a swap from the price curve.

ü      Structure a basis swap to reduce or enhance a risk position.

ü      Understand option terminology and concepts, including the parameters that influence the value of an option.

ü      Identify embedded calls and puts (e.g., swing).

ü      Create caps, floors and collars from puts and calls.       

ü      Compare and analyze swap versus option strategies.

 CPE Credits earned are:

Accounting & Auditing – 2

Consulting Services – 1

Management – 1

Specialized Knowledge & Applications – 12