After 12 years in Black Swan Risk Advisors, I am proud to announce that I have joined Ascend Analytics, the leading analytics provider for power and gas markets as Managing Director of Analytic Risk Solutoins.
In my new role, I will be providing expertise to Ascend's clients in the areas of analytic modeling, forecasting, optimization and simulation and also contribute to advance the software product and services to meet the evolving client needs. I will also develop thought leadership articles showing the business value of Ascend's solutions.
I am looking forward to be part of a team with some of the best talent in the industry. Ascend's risk, planning and optimization analytics combine the key drivers of physical and financial portfolios in an integrated, robust and coherent framework to support critical business decisions and provide a significant competitive advantage to clients.
In coming weeks I will be providing more details.
The term "real options" in the context of energy markets refers to all the potentially valuable flexibilities associated with the management of physical assets and third-party contracts. As with standard financial options, the value of a real option can be decomposed into two components: intrinsic value and extrinsic value.
We can illustrate the distinction between these two elements with an example. Consider a holder of natural gas storage capacity who uses the current forward price curve to determine the schedule of future injections and withdrawals that maximizes revenue. This projected value – referred to as the intrinsic value – is the revenue that would be realized if the manager were to hedge the storage related exposure with forward purchases and sales at current market prices.
However, even if the storage capacity is fully hedged there is still potential to generate additional revenue. For example, if forward calendar spreads were to change significantly in the future, the capacity holder has the right to rebalance the hedge portfolio in a manner that increases revenues over the initial intrinsic hedge strategy. This "re-optimization" profit would most likely be captured by accelerating or delaying planned injections or withdrawals. The incremental potential value – referred to as the option or extrinsic value – is significantly more challenging to quantify and hedge.
You can write us if you are interested in the published article written by Carlos Blanco and Christopher Mammarelli for the Energy Metro Desk - February 2016
Many of the key drivers of profitability at energy firms – such as outright commodity prices, refining margins, power generation spark spreads, and inter-market price spreads - are external factors that are beyond the influence of their managers. However, the day to day operating decisions involving oil and gas storage facilities, pipelines, transmission networks, marine vessels, petroleum refineries, and power plants provide these managers with very controllable opportunities to create (or to destroy) significant shareholder value.
Improving asset optimization decisions can generate risk adjusted returns well in excess of proprietary trading activities. For those managers whose incentive compensation is tied to operating results, these improvement can directly result in increased personal wealth.
Article written by Carlos Blanco and Christopher Mammarelli for the Energy Metro Desk - January 2016
This is an advanced course for energy practitioners interested in enhancing their applied knowledge of best practices in valuation, hedging and risk management of long term contracts and physical assets.
The course introduces the models and strategies used to value, hedge and manage the risk of derivatives and physical assets in leading energy trading organizations.
We will explore the embedded optionality and trading strategies to optimize storage, transportation (ground and marine) assets, and long term contracts in gas, power and oil markets. The course also covers the valuation, hedging and optimization of power generation units and refineries.
You will learn how to apply Monte Carlo simulation (stochastic forward curve models, Least-Squares Monte Carlo) and binomial/trinomial trees for physical asset valuation and hedging. Case studies will illustrate how to incorporate operational constraints in the analysis.
The course is designed for traders, analysts, risk managers, finance and back office personnel, audit and compliance and anyone in the organization interested in learning more about optimization, hedging and valuation of physical assets and long term contracts.
You will gain a good understanding of the practical applications of asset-based models and strategies from the point of view of the users of those models, not the quantitative developers.
For more information, please write to email@example.com
Here is a list of the courses that will be taught in Houston, Calgary, Singapore and London in 2016.
Looking forward to seeing you there.
If you have any questions, please let us know at firstname.lastname@example.org
- Energy Derivatives Hedging, Markets and Instruments (DPH1)
- Apr 11-12 (Singapore), June 7-8 (Houston), June 20-21 (London)
- Energy Derivatives Pricing, Hedging and Risk Management (DPH2)
- June 9-10 (Houston), June 22-23 (London), Oct 18-19 (Calgary), Nov 1-2 (Singapore)
- Advanced Energy Derivatives, Hedging and Risk Management (DPH3)
- Sept 12-13 (Houston), Nov 3-4 (Singapore), Dec 8-9 (London)
- LNG Trading, Hedging and Risk Management (LNGRM) - NEW
- April 13-14 (Houston), Sept 29-20 (Singapore), Dec 14-15 (London)
- Financial Derivatives Valuations and Controls Best Practices (FDB) - NEW
- Real options and Simulation in Energy Markets (DPH4)
- Jan 28-29 and Sept 14-15 (Houston), Oct 20-21(Calgary), Dec 12-13 (London)
- Credit, Liquidity and Counterparty Risk Management
- Oct 12-13 (Houston) ; Dec 6-7 (London)
Glencore (formerly known as Marc Rich and Co) is one of the world's largest commodity traders. Since its founding by Rich in the early 70's, the company has shown an extraordinarily high level of resiliency in dealing with a variety of crises over the past four decades. However, last month's near 'run on the bank' on September 28th caught Glencore's management by surprise and nearly brought the company to the brink of collapse. How Glencore management navigated this latest crisis should he carefully reviewed by commodity trading executives, regardless of asset class or geography. In this article, we discuss the lead up to the crisis, the path of the crisis, and how Glencore management navigated a way out. Flexibility and speed are the name of the game.
Case study covered in the following courses:
A comprehensive case study on the OW Bunker bankruptcy will be introduced in the 2015 Oxford Princeton Programme Courses on derivatives risk management and credit, liquidity and counterparty risk management. (DPH1, DPH2, LNGRM and CLCRM)
The case study discusses the overall OW Bunker business strategy and the failures in managing market and credit risks for different business units, with particular focus on the Dynamic Oil Trading operation in Singapore and the speculative positions from the physical distribution group. A series of videos, pre-reading materials and follow-up questions will help delegates prepare for the in-depth discussion. The case study will illustrate the key risk management lessons from the OW Bunker debacle.
1. Excellent account by Alessandro Mauro of the OW Bankruptcy based on the limited public disclosures of their hedging strategy (4 parts). See link here
2. An independent risk review conducted by experienced professionals would have likely highlighted the material gaps in the risk process of OW Bunker. Issues related to risk metrics, risk culture, risk management independence and stature and risk communication would have likely surfaced in the review.
Customized in-house seminar conducted for The Oxford Princeton Programme by Black Swan Risk Advisors in 2015
"Advanced Energy risk management and hedging" conducted for Canadian power producer
"Natural Gas markets, trading and hedging" conducted for major gas trading firm in Asia
"Risk management for Petrochemicals" conducted for leading Petrochemical firm in China
"Power risk managment and hedging" for leading renewables producer in Canada
For more information about the highly customized in-house offerings by The Oxford Princeton Programme and Black Swan Risk Advisors, please contact us email@example.com
Article published in Energy Metro Desk in April 2016
One of the main findings of the 9/11 commission report was that "the most important failure was one of imagination. We do not believe leaders understood the gravity of the threat." The same could apply to the Germanwings catastrophe as well as many other crises experienced by energy firms during the last few decades which have cost billions to their institutions such as BP Deepwater Horizon, the PG&E pipeline explosion or TEPCOs' Fukushima
In this article, we discuss some lessons that can be applied to energy firms to strenghten their crisis management processes.
Please write firstname.lastname@example.org for more information
Published in the Energy Metro Desk. March 2015
A low-price environment isn’t the only worry for E&P companies these days. Along with low prices comes a more scrutiny of hedging programs by boards of directors, management teams, investors, rating agencies and other stakeholders.
The trick for most of these outside stakeholders is how best to properly evaluate the quality of the various hedge decisions made by E&P management teams, since most firms rarely disclose their hedge philosophy and hedge benchmarks.
Compounding this little detail is the fact that each E&P company often has wildly different cost and debt structures, growth prospects and financial liquidity positions and thus a ‘one size fits all’ hedge strategy is about as far from reality as one can get. In
this paper, Carlos Blanco presents a few lessons from the recent collapse of oil prices that may help some E&P companies make better hedging decisions and avoid common mistakes.
For more information, please contact us at email@example.com