Enerji Programları
K01.Fundamentals and Practical Applications of Energy Risk Management, VaR and
Earnings at Risk.
Risk
This seminar takes participants from the basic statistics underlying value-at-risk to the most sophisticated techniques used by energy companies today. Learn how a set of effective planning tools can be used to frame, analyze and manage your organization's exposures.
Value-at-risk or VaR methodology is a user-friendly tool for measuring and controlling overall portfolio risk. Today, companies are extending VaR to also measure corporate earnings-at-risk (EaR), and using EaR to develop an enterprise wide risk management framework. VaR and EaR popularity, however, can hide many complex nuances in the use of these powerful tools.
In addition to presenting the fundamental concepts of Var, EaR and risk management, this seminar will also address the statistical tools that are required to effectively manage energy risk. Learn a comprehensive energy risk management methodology that addresses energy risk from the strategic perspective of the enterprise level all the way down to the detailed management of specific individual risks.
This programwill then focus on how to make value-at-risk work in practice—how to design, implement and use scalable production value-at-risk measures on real trading floors. Real-world challenges are discussed relating to measurement and computation of energy related uncertainty and risk. Don't let the complexity of VaR blindside your organization. Or worse, discourage you from using VaR altogether. g. View Past Seminar Attendees
What You Will Learn:
• What is Enterprise Risk Management and its relationship to energy risk
• The components of enterprise risk management and why they are important
• Energy as a percent of Cost of Goods Sold and the impact to Corporate Earnings
• The difference between systematic and specific risk and what to do about them
• Fundamentals of CAPM and RAROC for capital energy investments
• How to develop a Strategic Risk Management Plan and why it’s important
• Risk Framing: what it is and how it can be used to manage risk
• Risk Decision Matrix: How to identify, assess, control and monitor energy risk
• Fundamentals of hedging energy risk exposure
• Layered hedging strategies for volatile energy markets
• Using triggers and stop losses in dynamic hedging decisions
• Combining spot purchases, forward contracts and options to manage risk
• How to optimize supply portfolios using probability theory
• Using Demand Side Management options to manage price risk
• Combining Commodity Risk Reduction and Demand Side Management
• How to use statistical methods to measure energy risk
• Forward price simulation, how it’s used and how to do it
• Using Monte Carlo methods to measure price and volumetric uncertainty
• How to measure expected energy budget probability distributions
• Risk Quantification (Tools) including VaR, TEVaR, CVaR, CFaR
• What is earnings at risk (EaR) and how it applies to energy risk
• How to calculate VaR, TEVaR, and EaR
• How to Stress Test and Back Test the VaR calculation
Seminar Agenda
- What You will Learn (Session #1)
- Sources of energy risk – Where is it?
- What is Energy Risk Management and why its used
- How is energy risk measured?
- Enterprise Risk Management – what is it and why it used
- Components of Enterprise Risk Management and there relationship to Energy Risk
- The Internal Environment
- Objective Setting
- Event Identification
- Risk Assessment
- Risk Response
- Control Activity
- Information and Communication
- Monitoring
- What is Risk Appetite and how it relates to the risk management strategy
- What is the Efficient Frontier?
- Where is the best portfolio on the frontier?
Application:
Example – Identifying the risk facing an energy supplier
- What You will Learn (Session #2)
- Developing a Strategic Risk Management Plan
- Key elements of a Strategic Risk Management Plan
- Components of a Risk Response Matrix
- Systematic vs. Specific Risk
- The decision to manage vs. accept risk exposure
- Hedging Risk
- Review of Hedging Strategies
- Common Hedging Instruments – Futures, Forwards and Derivatives
Application:
A Hedging Primer: Examples of hedging energy price risk.
Application:
Combining energy price hedging with demand response opportunities: The net effect of commodity risk reduction and demand side management
- Strategic Hedging Strategies
- Portfolio diversification
- Layered hedging strategy
- Triggers and Stop Loss
Application:
Example – Setting-up a layered hedging strategy and comparing results for two different long-term sustainable price estimates
- What You will Learn (Session #3)
- What is value-at-risk or VaR
- Why value-at-risk is the risk measurement method of choice at most energy firms and what are the alternative approaches.
- The assumptions we need to know before using value-at-risk.
- What are TVaR, and Earnings-at-Risk (EaR) and why they are needed?
- The relationship between earnings-at-risk and the enterprise wide risk management strategy
- How energy price uncertainty impacts earnings-at-risk
- What the three different VaR calculation methodologies are and how they compare.
- Caveats and cautions when using VaR.
- How to calculate VaR and EaR using a simple example (no advance math!)
- What You will Learn (Session #4)
- Portfolios and volatility – getting the units right
- The two approaches to calculating VaR – historical simulation and model-building – advantages and disadvantages
- How to Stress Test and Back Test the VaR calculation
- Reporting change in Daily VaR, change in 5-Day VaR Moving Average, and change in the Stress Test extreme value over a historic time horizon
Application:
Example – Calculating the settlement VaR from a real-time obligation to serve electricity (valuing load and demand serving contracts). The pros and cons of simulation vs. closed-form solutions.
Your Instructor
Kenneth Skinner, Ph.D. – Dr. Skinner is a Senior Consultant with Summit Blue Consulting and has nearly 15 years of energy industry experience. As the recent Derivative Structuring Manager for Sempra Energy Solutions, a national energy supplier, Dr. Skinner focused on developing retail commodity supply strategies including portfolio risk management, hedging strategy, and least-cost supply opportunities. In addition to commodity supply, Dr. Skinner was responsible for valuing the benefit of demand reduction programs including the option value of various terms and conditions.
Dr. Skinner has significant experience in economic analysis and modeling of energy demand, forward energy prices, financial derivatives, transmission and pipeline capacity, natural gas storage, and generation assets using econometric time-series and cross-sectional analysis, statistical methods, optimization principles, real option valuation techniques; Structured valuation of distributed generation and electricity and natural gas commodity transactions, including demand response; Financial risk assessment and valuation of energy hedging strategies and market potential of new business ventures. He is fully trained in econometric methods, engineering principles, organizational development, optimization, and valuation techniques and has extensive experience with various software packages including Visual Basic, C++, SAS, SPSS, Crystal Ball, Matlab, GAMS, IREMM and ProSym.
