2. Real Options
OURS
This is a practical, hands-on course Who should attend?
in Real Options, which we’ve
non-mathematical experts.
Introduction
This program was specifically developed for Traders,
Asset & Portfolio managers, Quants, Risk managers and
constructed to be within the grasp of Analysts, but more it is also suitable to and helpful for:
▶ Front, Mid and Back office staff
We designed this two day course specifically to instruct
▶
▶
▶
Originators
ICT experts and Project managers
Legal staff and Compliance officers
participants in the areas of outright, embedded and real ▶ Staff of the Finance department
options, physical assets, hedging future cash flows of ▶ Controllers and Accountants
assets, optimization of allocation of assets, flexibility,
pricing of options, valuation of real options and Greek
variables as indicators for sensitivities.
Training
The training is based on a strong interactive approach
The course is about real options and while statistics are
in which the contribution of participants is of utmost
important in this area of expertise and there is a bit of
importance. Theory and practice are explained and
mathematics in the course material, in this course things
expounded using official definitions, scientific theories,
are explained so that everybody will be able to understand,
practical exercises, cases and simulations.
regardless of their mathematical abilities. This does not
affect the level of the course in any negative way, but allows
us to explain all subjects in an even more in-depth manner Documentation
than you can imagine. Participants will be provided with a syllabus with study
material for this specific program. The syllabus contains
Learning objectives all relevant documents including power point slides, fact
sheets, cases and exercises.
Acquiring insight and knowledge of:
▶ Option and options theory
▶ Options valuation and valuation of physical assets
▶ Scenario analysis
▶ Sensitivity analysis of cash flows
▶ Greeks variables
3. AGENDA
AGENDA
AGENDA
Program
DAY 1
Session 1: Session 3:
Options Power plants as real options
▶ Call & put options ▶ Power plants as sequence of call options on the spark/
▷ Premium dark spread
▷ Strike price ▶ Asset-backed trading
▷ Options style ▷ Spark spread optimization
▪ American, European & Asian Style, and more ▷ Delta hedging
▪ Plain vanilla versus Exotic options ▷ Strategy to lock in
▶ Options ▷ Dynamic hedging
▶ Outright options ▷ Objective approach
▶ Embedded options ▷ Subjective approach
▶ Real options ▪ Under/over-hedging
▷ Value of real option
▶ Flexibility as option ▪ Time value
▷ 1-sided right vs. 2-sided obligation ▪ Intrinsic value
▷ The real options approach ▪ Volatility of the spark spread
Session 2: Exercise:
Option valuation Power plants as real options
▶ Valuation models
▷ Black & Scholes Session 4:
▷ Binomial models Gas storages
▪ Trees
▶ Gas storage
▶ Disadvantages of models ▷ Sequence of time-spread options
▷ Assumptions do not represent real life
▶ Locking in the value of the gas asset
▶ Skew ▷ Hedging process
▷ Skewness of normal distributed curve ▪ Setting up hedge
▷ Tail risk - Choose amount/significance
▷ Volatility smile ▪ Unwinding hedge
▷ Positive skew - Choose significance
▷ Negative skew ▪ Repeat sequence
▶ Kurtosis ▪ Timing as critical element
▷ Lepto-kurtosis ▪ View on the market
▷ Height of the mean
▶ Impact on options premiums Exercise: Gas storage valuation
▷ Volatility curve Simulation: Trading simulation to lock in and optimize
▷ Volatility smile asset value
Excel: Option with 2 legs, 2 prices & 2 volatilities
Exercises
▶ Calculation of option value via binomial tree
▶ Calculation of option value with normal distribution
▶ Calculation of option value with log-normal distribution
▶ Calculation of option value with skew
4. Program
DAY 2
OURS
Session 5:
Transport capacity as real options
▶ Gas transport capacity
▷ String of location-spread options
▶ Power transport capacity
▷ Series of location-spread options
▶ Basis trading
▷ Trading the basis
Session 6:
Greek variables
▶ Sensitivity analysis
▷ Delta; What is it? What is its interpretation? How to apply
to assets?
▷ Gamma; What is it? What is its interpretation? How to
Session 7:
Managing Greeks in large portfolios
– Part 1
▶ Creating an overview of all Greeks
▶ Combining this overview with scenario analysis
▶ Steering exposures by doing transactions
▷ What deals are required or preferable?
Exercises:
▶ Greeks management for an energy portfolio of an energy
producer.
▶ Power options (estimate the Greeks of the individual
assets as well as the Greeks of the overall position; over
three moments in time: now, a week before expiration, as
well as at expiration).
L
apply?
▷ Vega; the impact of volatility Session 8:
▷ Theta; premium decay over time Managing Greeks in large portfolios
▷ Rho; interest rate sensitivity – Part 2
▶ Scenario analysis versus sensitivity analysis ▶ Management of an integrated portfolio of options
▶ Combined reporting ▷ Calculate (or estimate) the Greeks
▶ Matrix ▷ Create a matrix which incorporates both:
▪ Scenario analysis, and
Simulation: ▪ Sensitivity analysis
Trading options & managing flexibility in energy portfolios
Exercise:
Analysis of a portfolio of power options
5. LEADER
COURSE LEADER
Jeroen Koster
Trainer-Consultant Mercurious
Jeroen Koster is the co-author of
the book entitled “Refacing Risk,
building a fortune”.
The training centered onto several subjects including corporate
actions, risk management, compliance, volatility and trading
strategies.
After finishing high school, With over two decades worth of experience in the energy sector,
Jeroen Koster studied Applied Jeroen Koster is highly skilled and formally schooled in the
Mathematicsat the Technical nuances of this exciting industry. His experience and passion for
University (TU) of Twente. In 1996 passing on knowledge really make him an excellent tutor.
he became a professional Options
Trader (Market Maker) on the trading-
floor of the European Option Exchange (EOE) in Amsterdam.
For a number of years thereafter Jeroen traded in various option Reviews from the last
classes, both single stocks and indices and FX. Subsequently he
became responsible for the education of new hires and trainees
Real Options course:
at the European Option Exchange. Following the new millennium “I have now a better understanding of Risk Management
and the technical improvements and challenges it brought along, activities”
including the migration from open-outcry to screen-based trading Edison Trading
on electronic platforms, Jeroen became the Head of Trading at
the trading firm and specialist Van der Moolen. “I am now able to hedge the portfolio better”
Edison Trading
Jeroen has also worked as a Corporate Trainer at the
international derivatives trading firm All Options, in which position “Very good electronic exercises”
he was responsible for training staff for the roles of Derivatives Dong Energy
Trader, (senior) Traders and Back Office employees.
6. LANGUAGE
The workshop will be delivered in English.
DATE
25-26 March, 2013, Amsterdam, The Netherlands
SCHEDULE
Each day starts at 09.00 and finishes at 17.00hrs.
REGISTRATION
http://www.energy-expert-network.com/courses
E-mail: Johanna.oberg@energy-expert-network.com
Phone:+46 (0) 85 333 2599
FEES
ABOUT THE ORGANIZERS
Very Early Bird 1945€ + Dutch VAT
(register before 30 December)
Early Bird 2060 € + Dutch VAT
(register before 25 January)
Standard price 2290€ + Dutch VAT
ENERGY EXPERT NETWORK MULTIPLE REGISTRATION DISCOUNT
The Energy Expert Network is a network of experts Register two or more people from the same company
and get a 10% discount per person.
and hands-on energy market participants that provides
companies with tailored courses. FOOD AND BEVERAGE
Food and beverages will be provided to the
The Energy Expert Network consists of the ‘best of the participants during the day. Specific wishes can be
submitted to the organization.
best’ industry experts, well known for their knowledge and
experience in teaching energy industry professionals. Energy DOCUMENTATION
Expert Network also provide open courses on fixed dates in Participants receive documentation, calculations and
exercises in a manual.
co-operation with external experts.
