This course builds on the previous two (Derivatives 1 and 2) to greatly expand the ability of participants to apply these concepts in addressing real-world complexities.  Participants learn how simple derivatives can be combined to create tailored solution packages for energy companies.  This course also establishes a thorough understanding of more sophisticated non-standard (i.e. “exotic”) option structures that are essential to meet the specific and complex needs inherent in the energy industry.  Because these non-standard structures exist in embedded form in assets and contract terms, it is important that familiarity with “exotics” not be limited solely to personnel specifically assigned to dealing with them. 

The central focus of the program is to enable participants to unbundle complex risk structures and thereby identify and sort the risk components embedded in contract terms, plant operations and physical assets.  Participants will learn that, once identified and isolated, these embedded derivative positions can be managed and, when applicable, value can be extracted from them.  Understanding the unbundling and reverse engineering process will assist participants in achieving more innovative and value added problem-solving skills. 

Applied Energy Derivatives (Derivatives 1) and Advanced Structures and Risk Management (Derivatives 2) or their equivalent is a minimum prerequisite for this program; no other advanced preparation is required.   

The Results 

At the conclusion of this program, participants will be able to: 

ü      Combine multiple derivative components to create customized hedge structures.

ü      Provide below-market pricing of energy through the use of option structures.

ü      Tailor innovative participatory collars, ratio spread and other options structures to address specific risk needs or to reduce the cost of hedging. 

ü      Utilize innovative Asian-style, barrier, digital and other exotic structures.

ü      Conceptualize the role correlation as it influences the value of spread, basket and quanto options.

ü      Specify and separate the discreet risk components embedded in a complex agreement, including extracting identified cash values.

ü      Price and structure complex transactions, embedding multiple derivatives. 

ü      Identify the optionality embedded in energy assets and operations.

ü      Measure the desirability of hedge structures for power generators using multi-fuel strategies.

ü      Extract value and create favorable pricing by arbitraging mis-priced embedded derivatives.

CPE Credits earned are:

Accounting & Auditing – 2

Consulting Services – 1

Management – 1

Specialized Knowledge & Applications – 12