Power Risk Management
Level 4
12-28 iulie 2021
The educational program "Risk management" takes place online as an e-learning package being completed with a webinar that will settle the knowledge acquired individually. It includes various modules, study materials, exams and certification. Students who pass the exam can choose to be registered as a Chartered Professional on the Entrima charter.
The "Energy, Energy Markets and Trading" programs available on the Entrima’s e-learning platform are specially designed to expand students' knowledge and skills on electricity. The programs cover electricity production, electricity transmission and infrastructure, electricity supply and consumption, the organization of European energy markets, the role of market participants, the regulation of European electricity markets, the role of governments, tariff and tax setting, energy products and their prices, electricity trading, energy trading platforms, asset and portfolio management, asset-backed trading, power plant optimization, power trading strategies and trading-related processes such as settlement, billing, valuation positions.
Entrima was founded (2014) to provide a solution to market participants for the influx of regulation of capital and energy markets. Various regulatory packages require staff training; education is a mandatory part of the compliance framework. Interpretation of case studies requires specific knowledge of markets, products, prices and trading, as well as value chains of metals, agricultural products, oil, gas, coal and electricity. This means that examination and certification have become important and Entrima has started to offer a learning solution to market participants
The webinar is aimed at people who:
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want to get detailed knowledge on risk management in trading electricity and / or natural gas;
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requires training in modern risk management methods in order to develop the risk management activity
Benefits
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The seminar participant benefits from modern interactive teaching methods, benefiting both from the access to a top e-learning platform in this field and from the presence of a lecturer with practical and theoretical experience..
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Students who pass the exam can choose to be registered as a Chartered Professional at the Entrima charter
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At the end of the program, in addition to the knowledge gained, students remain with access for 9 months to the interactive e-learning platform Entrima, being able to access any course in it.
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Curricula
Individual training programs carried out on the Entrima platform:
·Fundamentals of commodity markets pietei marfurilor (130 min, exam)
1. Asset classes – Types of markets
About fixed-income, equity, real estate, FX and commodities
Concerning risk-reward ratios and risk appetite
2. Commodities & commodity markets
About metals, softs & energy, but also freight, carbon & fibres
Covering relationships
3. Production, storage, transport & consumption – Up-, mid- & downstream
Concerning various types of capacity
Including availability and utilization
4. Market participants & their role
About commodity trading firms & investors
Covering risk diversification
5. Spot & forward markets – Physical & financial products
Covering the concept of price volatility
Specifics concerning electricity & natural gas - Balancing
6. Commodity derivatives – Contract specifications & settlement
Physical delivery & cash settlement.
Delivery period & delivery moment
7. Pricing of commodities – Price driving factors
Fundamental & non-fundamental price driving factors
Price analysis, including seasonality & mean-reversion
8. Commodity markets vs. Financial markets
Differences and similarities between the characteristics
A comparison is made concerning markets, products & pricing
9. The role of speculators
About the impact of speculators on price levels
Concerning politicians, policy makers & regulation
·Fundamentals of energy trading (340 min, exam)
1. Liberalisation of the Energy Markets
What is aim of liberalisation? What are the consequences?
2. Risk
Risk and return; the risk-reward ratio; quantification vs. qualification.
3. Market risk
About price risk.
4. Risk management
Identification of risk, measuring risk and control of risk.
5. Volatility
The concept volatility explained; calculation & interpretation of volatility figures.
6. Counterparty risk
Credit risk and delivery risk.
7. Credit risk management
Clearing; netting; credit limits; ratings; sleeving; systemic risk.
8. Liquidity & Liquidity risk
Market liquidity vs. funding liquidity.
9. The trading function
The role of trading business unit.
10. The trading organisation
Front, Middle & Back Office.
11. Trading
What is it and how is it organised?
12. Trading – The reasons for concluding transactions
About procurement, sales, balancing, hedging, arbitrage and speculation.
13. Pricing – The order book
How does trading take place? How are prices set? What orders are executed? When? How?
14. Trading – Order types
What order types are applied and for what reasons?
15. Trading process – Clearing
Central counterparty; clearing house & members; credit risk; margining & collateralisation.
16. Trading process – Settlement
Physical delivery versus cash settlement; settlement procedures.
17. Trading process – Transaction flow
Pre-trade, trade & post-trade processes; tasks & responsibilitis of front, mid & back office staff.
18. Trading process – ETRM system
Energy trading and risk management software; users and purposes.
19. Markets & Products – Spot vs. Forward markets
Spot/prompt vs. forward/futures markets.
20. Markets & Products – Derivatives
What are derivatives? What are they used for? And by whom?
21. Markets & Products – Forwards vs. Futures
What are the differences?
22. Markets & Products – Contract for difference
What is a CFD?
23. Markets & Products – Swaps
What is a swap?
24. Markets & Products – Options
What is a (call/put) option?
25. Trading platforms – OTC markets & trading
How is OTC trading organized? What are master agreements?
26. Trading platforms – Brokerage services
What is a broker? Inter-dealer brokers vs. broker-dealers.
27. Trading platforms – Exchange trading
What features does exchange trading have? How is it organized? Fee structure.
28. Trading platforms – Trading screens & platforms
What details are relevant to traders?
29. Pricing, price drivers & indexation
What factors drive prices? What is an index?
30. FX markets & trading
Exchange rates, Forex exposures; the role of the treasury department.
31. Accounting – Valuation
Bookkeeping & accounting rules; M-to-M.
32. Accounting – Book structure
How do firms organize internal transfers? What is a book structure? How is accounted for P/L?
33. Terminology – Upstream, midstream & downstream
Explanation of the terminology which is related to the value chain.
34. Terminology – Opening & Closing + Long & Short
What do the concepts of long or short imply? And opening or closing?
·Risc management – basic level (190 min, exam)
1. Risk management - Introduction
The basics of risk management
About policies, methodologies and organisation
2. Risk appetite
About risk tolerance and risk acceptance
Concerning risk & reward and the ratio between them
3. Market risk – Probability distribution curves
About normal, log-normal & other distributions
Covering skew, tail risk & one-time events
4. Price volatility
Covering different types of volatility (e.g. historical & implied)
Various ways to calculate volatility & how to interpret outcomes
5. Counterparty credit risk
About external clearing and internal credit limits
Concerning collateralization & margining
6. Liquidity risk
About trading activity in markets (or the lack of it) & the consequences for market
participants
7. Alpha & Beta
About the capital asset pricing model of Markovich
Covering market & company risk; systemic vs. non-systemic risk
8. Analyzing & Modeling
Concerning the modeling of (energy) asset-related businesses
About fundamental, technical, statistical & psychological analysis
9. Forecasting
About load forecasting & price forecasting
Covering production, customer off-take & contract settlement
10. Correlation & linear regression
About statistical price relationships
Concerning correlation – Model risk, incl. normality & linearity
·Risc management – intermediate level (170 min, exam)
1. Value at Risk (VaR) – The concept
About the quantification of risk; concerning risk metrics
Covering probability distribution, time horizon & confidence
2. Stochastic processes
About probability distribution curves
Stochastic processes – Jump, diffusion & jump-diffusion process
3. VaR – Parametric approach
About the most simple method to quantify risk
Concerning the variance/co-variance methodology
Examples & calculations, incl. the interpretation of the outcome
4. VaR – Historical simulation
About a very practical method to quantify risk
Including calculations & examples
5. VaR – Monte Carlo simulation
About the most complex, but flexible method to quantify risk
Concerning the creation of assumptions & generating outcomes
Including calculations & examples
6. Stress testing
About what-if, worst case & worst losing streak scenarios
About the pros & cons of stress tests
7. Expected shortfall - CVaR
About the conditional value at risk methodology
Concerning the average loss in abnormal market circumstances
Including calculations & examples
8. Implementation of VaR
Back testing
Management attention
·Risc management – advanced level (180 min, exam)
1. VaR for multi-commodity portfolios
Portfolio management; VaR for combined positions
About the aggregation of VaR at portoflio level
Concerning correlation & cross-margining
2. VaR for multi-FX portfolios
About FX exposures
Concerning risk off-setting and a natural hedge
3. Model risk
Covering assumptions and their consequences
Concerning probability distributions
About skew & skewness
4. Hedging strategies
Concerning different ways of hedging
About a perfect hedge, a value hedge & a beta hedge
Comparing the outcomes and selecting the best strategy
5. Proxy-hedging & cross-hedges
About hedging with a liquid product & basis risk
Concerning proxy selection and hedge ratios
6. Delta-hedging
About an objective & dynamic risk management approach
Concerning timing & volume – When to hedge? What volume?
7. Pros & cons of hedging
About the advantages & disadvantages of mitigating market risk
Concerning commonly used arguments to hedge or not to hedge
·Risc management – expert level (170 min, exam)
1. Risk management & the organisation
About enterprise-wide risk management (EWRM)
Concerning tools, methods and structures
Covering segregation of duties
2. Limit structures
About the combination of a position limit and a risk limit
Concerning liquidity risk management
Stochastic processes – Jump, diffusion & jump-diffusion process
3. Asset & portfolio management
Concerning the client base and contractual obligations & rights
About production capacity, the allocation of it & maintenance
4. Metrics in risk management
Concerning credit value at risk & economic capital
About value at risk, cash flow at risk & margin/earnings at risk
5. Performance management – Risk capital
Concerning capital allocation & expected return
About RAROC, RORAC & RARORAC
6. Performance management – Sharpe ratio
About measuring performance
Concerning its definition, the calculation and interpretation
Including its pros & cons
7. Performance management – Treanor ratio
About alpha & beta
Concerning its definition, the calculation and interpretation
Including its advantages & disadvantages
8. Credit risk management
About (un)expected loss & credit value at risk
Concerning probability of default, loss given default, current exposure, potential future exposure & current exposure
Completion webinar:
·Recapitulation of online courses that have been taken to incorporate the materials in a solid way
·Portfolio management
·Balancing different types of risk
Hedging tools
Cost
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1440 EUR/person;
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