 Full Course Description
KS202
Advance Energy Risk Calculations
Value-at-risk or VaR has become the industry standard for measuring uncertainty. This course takes the participants from the basic statistics underlying value-at-risk to the most sophisticated techniques used by energy companies today. The focus is 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.
Learn These Keys to Success:
1. How VaR is calculated in practice.
2. How correlation and hedging work together to manage risk.
3. Why different calculation approaches are needed for different applications.
4. How the underlying statistics can make or break energy risk calculations.
5. How value and risk are related and how both are described by probability distributions.
Seminar Agenda
• What is VaR, TVaR, PVaR, Earnings at Risk and why they are needed?
• The three approaches to calculating VaR – model-building, historical simulation and Monte Carlo
simulation– advantages and disadvantages.
• How to describe portfolio risk using delta, gamma, and vega.
• Portfolios and volatility – getting the units right.
• How to calculate VaR using historic simulation.
• How to calculate VaR using variance-covariance (model-building) methods: 1) The linear model (delta);
2) The quadratic model (delta – gamma); 3) How to calculate VaR using Monte Carlo simulation.
• 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.
• How to calculate VaR using Monte Carlo simulation for physical assets and corporate portfolio risk.
• How to build GBM, Mean Reversion Jump Diffusion, and GARCH pricing models to measure uncertain price risk.
• Example of using Monte Carlo to measure the value and risk of an electric generator and natural gas storage assets.
• Using the Efficiency Frontier and the Sharp Ratio to determine VaR limits and risk tolerance.
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