Structure of the course: There will be a total of seven sessions. The main professor of the course will be Santiago Pellegrini, who will teach 6 sessions. The other session will be taught by another practitioner with deep experience on energy markets and risk management.
* Prof. Santiago Pellegrini (Head of Risk Modeling at Repsol, PhD)
* Prof. Pablo Villaplana (Chief Operating Officer, OMIClear)
1. INTRODUCTION TO COMMODITIES MARKETS. ANALYSIS OF FORWARD CURVES
-Understanding basic types of commodities: energy (natural gas, coal, oil, electricity, CO2 emission rights), soft (coffee, sugar, cocoa, cotton), industrial metals (copper, aluminium, zinc), precious metals (gold, silver), grains and life stock (corn, wheat, soybeans, hogs, cattle).
-Commodities forward curves idiosyncrasies: understanding contango, backwardation, seasonality; risk premium and convenience yield.
-Electricity market and interrelationships between commodities: dark and spark spread, clean dark and clean spark spread.
2. RISK MANAGEMENT AND VALUATION COMMODITIES FUTURES. RISK MANAGEMENT IN THE NON-FINANCIAL SECTOR
-Risk management definition and objective. Benefits of risk management. Main determinants of risk management. Why should firms in the non-financial sector manage risk?
-Financial Risk Measures (application to the energy sector): VaR, CFaR
-Risk management in independent retail companies: practical example
3. COMMODITIES AS AN ASSET CLASS. (I)
-Portfolio decisions with and without commodity instruments: the role of commodities in risk diversification. Benefits and disadvantages of adding commodities to a portfolio.
-Efficient Frontier of Commodity Portfolios
-Strategic Asset allocation and commodities.
-Correlation between financial and commodities markets. Role of speculators .Recent developments in the regulation of commodities and financial markets.
4. REAL OPTIONS I
-Introduction to Real Options
-Basic types of Real Options
-Valuation of Real Options: binomial model
-Valuation of physical assets as Real Options: Power Plant, Gas Storage, Interconnector;