Energy Risk Management & Analytics

Risk - Deep Dives — Markets & Trading

About the Course

The programmes “Energy Risk Management & Analytics” are specifically designed to expand students’ knowledge of, and skills with respect to, risk, exposures, managing uncertainty, portfolio management, setting limits and implementing controls. Next, the programmes aim at products & potential price changes. The focus is on risk with respect to trading & portfolio management, and therefore the primary aim is at market risk. Next, counterparty risk, liquidity risk and operational risk are considered as far as these relate to trading and portfolios. Next, analytics is also included, because analysis have to be made in order to form opinions and draw conclusions. Analytics also contains the application of statistics and mathematics, which are applied to construct forward curves and price contracts; crucially important for companies.


In the first level of the “Energy Risk Management & Analytics” programmes focus is on the identification of risk. The focus is at types and varieties of risk and how these should be addressed. This programme provides the fundamentals of risk; it covers definitions of risk, uncertainty, and volatility. The programme forms a solid basis for taking risk management to its next steps: assessing and quantifying risk, as well as controlling exposures.

Next to market risk, counterparty risk, operational risk, and liquidity risk are considered. It is explained what they mean to an organisation’s exposures. This programme also covers statistics for the application of such is of utmost importance for the quantification of risk.

Course Contents

Risk management – Introduction

  • The basics of risk management
  • About policies, methodologies and organisation

Risk appetite

  • About risk tolerance and risk acceptance
  • Concerning risk & reward and the ratio between them

Market risk – Probability distribution curves

  •  About normal, log-normal & other distributions
  • Covering skew, tail risk & one-time events

Price volatility

  • Covering different types of volatility (e.g. historical & implied)
  • Various ways to calculate volatility & how to interpret outcomes

Counterparty credit risk

  • About external clearing and internal credit limits
  • Concerning collateralization & margining

Liquidity risk

  • About trading activity in markets (or the lack of it) & the consequences for market participants

Alpha & Beta

  • About the capital asset pricing model of Markovich
  • Covering market & company risk; systemic vs. non-systemic risk

Analyzing & Modeling

  • Concerning the modeling of (energy) asset-related businesses
  • About fundamental, technical, statistical & psychological analysis


  • About load forecasting & price forecasting
  • Covering production, customer off-take & contract settlement

Correlation & linear regression

  • About statistical price relationships
  • Concerning correlation – Model risk, incl. normality & linearity

Exam & Certification


In the second level of the “Energy Risk Management & Analytics” programmes focus is on the quantification of exposures. In this programme is shown by what ways risk can be measured. Probabilities are considered, as well as negative impact. Thorough attention is given to the Value at Risk methodology and a variety of sub-forms is provided, such as the parametric method, historical simulation method, and Monte Carlo simulations.

On top of the Value at Risk methodology, attention is given to additional methods and/or alternatives, such as stress testing, expected shortfall, or conditional value at risk.

In this programme students will experience how correlation coefficients can be used, and also what the consequences of such are. The advantages & disadvantages of correlations are taken into account.

Course Contents

Value at Risk (VaR) – The concept

  • About the quantification of risk; concerning risk metrics
  • Covering probability distribution, time horizon & confidence

Stochastic processes

  • About probability distribution curves
  • Stochastic processes – Jump, diffusion & jump-diffusion process

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

VaR – Historical simulation

  • About a very practical method to quantify risk
  • Including calculations & examples

VaR – Monte Carlo simulation

  • About the most complex, but flexible method to quantify risk
  • Concerning the creation of assumptions & generating outcomes
  • Including calculations & examples

Stress testing

  •  About what-if, worst case & worst losing streak scenarios
  • About the pros & cons of stress tests

Expected shortfall – CVaR

  • About the conditional value at risk methodology
  • Concerning the average loss in abnormal market circumstances
  • Including calculations & examples

Implementation of VaR

  • Back testing
  • Management attention

Exam & Certification


In the third level of the “Energy Risk Management & Analytics” programmes focus is on risk control. Exposures need to stay within certain boundaries. This programme provides insight in the following elements: How are these limits set and how can exposures be lowered? This programme covers the application of derivatives as tools to control risk. Students are explained how forwards, futures, swaps and options can be used for hedging purposes.

This programme also covers risk management models, the limitations of the application of such and model risk.

Course Contents

VaR for multi-commodity portfolios

  • Portfolio management; VaR for combined positions
  • About the aggregation of VaR at portoflio level
  • Concerning correlation & cross-margining

VaR for multi-FX portfolios

  • About FX exposures
  • Concerning risk off-setting and a natural hedge

Model risk

  • Covering assumptions and their consequences
  • Concerning probability distributions
  • About skew & skewness

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

Proxy-hedging & cross-hedges

  • About hedging with a liquid product & basis risk
  • Concerning proxy selection and hedge ratios


  • About an objective & dynamic risk management approach
  • Concerning timing & volume – When to hedge? What volume?

Pros & cons of hedging

  • About the advantages & disadvantages of mitigating market risk
  • Concerning commonly used arguments to hedge or not to hedge

Exam & Certification


In the fourth level focus is on risk optimisation. This programme goes beyond scenario analysis and includes performance management, as well as portfolio management. Focus is also on the fact that trading environments can be protected by a variety of elements to control operational risk. This programme also incorporates counterparty risk and therefore attention is given to specific credit risk management tools and methods.

Course Contents

Risk management & the organisation

  • About enterprise-wide risk management (EWRM)
  • Concerning tools, methods and structures
  • Covering segregation of duties

Limit structures

  • About the combination of a position limit and a risk limit
  • Concerning liquidity risk management
  • Stochastic processes – Jump, diffusion & jump-diffusion process

Asset & portfolio management

  • Concerning the client base and contractual obligations & rights
  • About production capacity, the allocation of it & maintenance

Metrics in risk management

  • Concerning credit value at risk & economic capital
  • About value at risk, cash flow at risk & margin/earnings at risk

Performance management – Risk capital

  • Concerning capital allocation & expected return

Performance management – Sharpe ratio

  • About measuring performance
  • Concerning its definition, the calculation and interpretation
  • Including its pros & cons

Performance management – Treanor ratio

  • About alpha & beta
  • Concerning its definition, the calculation and interpretation
  • Including its advantages & disadvantages

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

Exam & Certification

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Entrima provides learning services for professionals in the commodity & energy markets.

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Entrima’s mission is to transfer knowledge regarding the business, controls & operations of parties in (or relating to) the wholesale markets.

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