Covering flexibility in commodity or energy portfolios and how this impacts trading activities. Asset-backed trading and dynamic hedging are included.

Workshop title
“Mastery of Markets & Trading”.

Duration & intensity
1-day session.

When?
This 1-day workshop is provided each year on the following three dates:

• The Thursday following the 1^st Monday in February – Winter session
• The Thursday following the 1^st Monday in June        – Spring session
• The Thursday following the 1^st Monday in October   – Autumn session

Target group
Any medior in a business, control or support function at a market operator, market facilitator or market participant who is ready to become a senior, and for those who already are senior.

Learning objectives:

• Master practical knowledge about flexibility embedded in physical assets.
• Understand the value of commodity or energy transport, storage and processing capacity.
• Get a clear overview of the real option theory.
• Gain expertise in the field of embedded flexibility (business decisions) in supply contracts.
• Master take-or-pay constructions, volume flexibility and swing optionality.
• Optimise skills regarding optionality in an asset portfolio.
• Develop competencies in the field of dynamic hedging.
• Become an expert in asset-backed trading.
• Understand the implications of managerial decisions.

Content
The following topics will be addressed during the workshop:

• Flexibility in commodity or energy portfolios
  • Flexibility
    • Buyer and seller
      • Obligations versus rights
    • Choices to be made
      • Optionality
  • Real option theory
    • Discounted cashflow vs. net present value
    • Financial options vs. real options
    • Identifying, assesssing and controlling managerial decisions
    • Modelling business decisions
  • Variety of types of flexibility
    • Project size
      • Option to expand + Option to contract + Option to expand or contract
    • Project life & timing
      • Growth options + Option to initiate + Option to abandon + Sequencing option
    • Project operations
      • Output mix option + Input mix option + Operating scale options
• Flexibility in supply contracts
  • Structured contracts
    • Embedded optionality
  • Modelling business decisions
    • Modelling of embedded options
  • Supply contract features
    • Take-or-pay
    • Volume flexibility
      • Modelling
      • Hedging embedded optionality
        • Market liquidity
        • Possible scenarios
    • Swing option
      • The value of swing options
      • Hedging with futures
    • ACQ & DCQ
    • Click contract
      • Price cap
      • Multiple clicks
  • Validity period of proposal
  • Supplier portfolios full of optionality
  • Volume flexibility
    • Delta-hedging with term contracts
      • Periodic adjustments
      • Objectivity-subjectivity
  • Dynamic hedging
    • What is it?
    • How to effectuate it?
    • What are the ins and outs?
      • Practicalities
      • Impact for Front, middle and back offices
• Flexibility in physical assets
  • Physical capacity
    • Input & output
    • Future margin = value differential between output and input
  • Modelling physical assets and their flexibility
    • In terms of financial options
      • For valuation & hedging purposes
  • Asset-backed trading
    • Securing the future margin
      • Hedging with futures spreads, or spread futures
    • Optimisation of the cashflows
    • Dynamic hedging of asset
    • Spread trading
  • Spread option valuation
  • Storage capacity
    • Hedging the time spread exposure
    • Time spread option
    • Hedging call on time spread
    • Complexity
  • Transport capacity
    • Hedging the location spread exposure
    • Location spread option
  • Production & consumption capacity
    • Margin option
    • Power plants
    • Refinery & crusher
  • Hedging spread options versus hedging capacity
  • Liquidating a hedge
    • Liquidating a hedge on an outright position
    • Liquidating a hedge on storage capacity
    • Liquidating a hedge on transport capacity
    • Liquidating a hedge on processing capacity
  • Dynamically hedging
    • Dynamically hedging an outright option
    • Dynamically hedging a spread option – Strategy
    • Dynamically hedging a spread option – Details