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This new course is designed specifically to expand participants\' knowledge and skills in the areas of risk, exposures, managing uncertainty, portfolio management, setting limits and implementing controls. Products, potential price changes and risk management with respect to trading and portfolio management are also focused upon during the course, therefore the primary aim is that of market risk.
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11-12 October, 2012, Amsterdam
CALCULATIONS, INTERPRETATIONS AND EXTENSIONS
Beyond Value At Risk
Jeroen Koster, Mercurious Course Leader
Practical, hands-on course - also for non-mathematical experts.IntroductionThis new course is designed specifi cally to expand participants’ knowledge and skills in the areas of risk, exposures, managing uncertainty, portfolio management, setting limits and implementing controls. Products, potential price changes and risk management with respect to trading and portfolio management are also focused upon during the course, therefore the primary aim is that of market risk. Ways to measure or quantify risk are essential in this course, therefore scenario analysis and sensitivity analysis are also included.
The course is about risk management and while statistics are important in that fi eld of expertise and a bit of mathematics is incorporated, in this course things are explained in a way that everybody will be able to understand, regardless of their mathematical abilities. This does not aff ect the level of the course in any negative way, but allows us to explain all subjects in an even more in-depth manner than you can imagine.
Learning objectivesAcquiring insight and knowledge of:
▶ Quantifi cation of risk; measuring exposures with Excel ▶ Calculation of exposures, and more importantly, the interpretation of such
▶ Quantifi cation methods; practical approaches ▶ Value at Risk; What is it? What are its limitations? ▶ Varieties of Value at Risk approaches ▶ Advantages and limitations of the Value at Risk methodology ▶ Stress testing; Why? How?COU
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▶ Correlation coeffi cients and their applications; What is their use? Limitations?
▶ Expected shortfall; Conditional Value at Risk; What is it? How should it be interpreted? How is it calculated?
▶ Implications of changes in volatility ▶ Implications of the lack of or changes in liquidity
Who should attend?This program was specifi cally developed for Risk managers and Analysts, but it is also suited to:
▶ Mid offi ce staff ▶ Back Offi ce staff ▶ ICT experts ▶ Project managers ▶ Legal staff ▶ Compliance offi cers ▶ Accountants, Controllers, Finance and control staff , Asset and portfolio managers, Employees of exchanges, Staff of clearing organizations, Traders, Dispatchers (Operators or Shift traders), Sales managers and staff , Originators
TrainingThe training is based on a strong interactive approach in which the contribution of participants is of utmost importance. Theory and practice are explained and expounded using offi cial defi nitions, scientifi c theories, practical exercises, cases and simulations.
Documentation Participants will be provided with a syllabus with study material for this specifi c program. The syllabus contains all relevant documents including power point slides, fact sheets, cases and exercises.
Beyond Value at Risk
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ProgramDAY 1Session 1: Measuring market risk
▶ Introduction ▶ Quantifi cation of risk; diff erence between risk and uncertainty
▶ Calculating exposure(s); using common sense ▶ Business model; focus at practice ▶ Terminology and Statistics
▷ Why is statistics important? ▷ Why is understanding even more important than applying fi gures and models?
▷ Standard deviation ▪ Volatility
▪ Annualized standard deviation ▪ Types of volatility
▪ Future volatility ▪ Estimated volatility ▪ Historical volatility ▪ Implied volatility
▷ Variation and covariation ▪ Correlation ▪ Co-integration ▷ Normal distribution and Log-normal distribution ▷ Mean, median and modus
Exercise: Volatility: Calculate variance and standard deviation
Session 2:Value at Risk
▶ Value-at-Risk (VaR) concept ▷ Defi nition of VaR ▪ What is it? ▪ What is it used for? ▪ What are its (dis)advantages? ▷ Methodology ▪ Underlying value
▪ Notional amount
▪ Volatility; its impact on the outcome ▪ Liquidation period; its impact ▪ Confi dence level; its impact ▪ Types of VaR methodologies
▪ Historical simulation ▪ Variance-Covariance methodology ▪ Monte Carlo simulation
▶ Implementation of dynamic market RM ▷ Implementation of VaR ▷ Back testing ▷ Reporting
Exercise: Calculation of VaR (Variance-Covariance Method) of an oil and gas portfolio
Session 3: Monte Carlo Simulation
▶ VaR methods ▷ Historical simulation technique ▷ Analytical method ▷ Monte Carlo simulation technique ▪ Assumptions ▪ Running multiple scenarios ▪ Diff erent outcomes ▪ Distribution pattern ▪ Suitable for portfolios containing fl exibility ▪ Suitable for options
Simulation: Monte Carlo simulation (Power portfolio)
Session 4:Expected Shortfall
▶ Beyond Value at Risk ▷ VaR has limitations, so what are alternatives? ▷ What are add-ons?
▶ Conditional Value at Risk (CVaR) ▷ What happens in the small percentile? ▷ Expected shortfall ▷ Calculation of the expected loss
Factsheet: Expected ShortfallExercise: Expected Shortfall - CVaR
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E ProgramDAY 2Session 5: Event risk and Stress tests
▶ Event risk ▷ Tail risk: black swans, fat tails ▷ Examples of one-time-events ▷ Skew(ness); What is it? What are its consequences?
▶ Event risk management ▷ Stress tests and their use ▪ Ignore all correlations ▪ Set all correlations at 0 ▪ Set all correlations at 100% (plus or minus) ▪ Worst case performance ▪ Worst losing streak
▶ Back testing
Exercise: Stress testingSimulation: Play a trading simulation and understand the consequences of trading by taking upon the role of risk manager. Execute transactions in the market and calculate the available working capital, the initial margin, variation margin, exchange fees, clearing fees, risk exposure and net liquidation value of the portfolio.
Session 6:Model risk
▶ Price volatility ▷ Historical volatility versus future volatility ▷ Reference period ▷ Volatility trending
▶ Correlation ▷ Normality ▷ Linearity ▷ Cross-margining
▶ Liquidity risk ▷ Dynamics of liquidity ▷ Bid-ask obligations
Exercise: What is liquidity, volatility, correlation?Excel: Calculate the volatility of the spark/dark spread Excel: Calculate the correlation coeffi cient of a product based on a data set
Session 7: Greek variables
▶ Sensitivity analysis ▷ Delta; What is it? What is its interpretation? ▷ Gamma; What is it? What is its interpretation? ▷ Vega; the impact of volatility ▷ Theta; premium decay over time ▷ Rho; interest rate sensitivity
▶ Scenario analysis versus sensitivity analysis ▶ Combined reporting ▶ Matrix
Simulation: Trading options and managing fl exibility in energy portfolios
Session 8: Asset and Portfolio management
▶ Managing a mixed portfolio of assets, obligations and a client base
▶ A portfolio consisting of multiple energy products ▷ Delta hedging ▷ Dynamic hedging ▪ Embedded options ▪ Real options
Exercise: Embedded options; fl ex contracts
Jeroen Koster is the co-author of the book entitled “Refacing Risk, building a fortune”. After fi nishing high school, Jeroen Koster studied Applied Mathematicsat the Technical University (TU) of Twente. In 1996 he became a professional Options Trader (Market Maker) on the trading-fl oor of the
European Option Exchange (EOE) in Amsterdam.
For a number of years thereafter Jeroen traded in various option classes, both single stocks and indices and FX. Subsequently he became responsible for the education of new hires and trainees at the European Option Exchange. Following the new millennium and the technical improvements and challenges it brought along, including the migration from open-outcry to screen-based trading on electronic platforms, Jeroen became the Head of Trading at the trading fi rm and specialist Van der Moolen.
Jeroen has also worked as a Corporate Trainer at the international derivatives trading fi rm All Options, in which position he was responsible for training staff for the roles of Derivatives Trader, (senior) Traders and Back Offi ce employees. The training centered onto several subjects including corporate actions, risk management, compliance, volatility and trading strategies.
With over two decades worth of experience in the energy sector, Jeroen Koster is highly skilled and formally schooled in the nuances of this exciting industry. His experience and passion for passing on knowledge really make him an excellent tutor.
Jeroen Koster Trainer-Consultant Mercurious
LEADERLEADERLEADERCOURSE LEADER
Jeroen Koster is the co-author of the book entitled “Refacing Risk, building a fortune”.
After fi nishing high school, Jeroen Koster studied Applied Mathematicsat the Technical University (TU) of Twente. In 1996 he became a professional Options Trader (Market Maker) on the trading-fl oor of the
LANGUAGEThe workshop will be delivered in English.
DATE 11-12 October 2012, Amsterdam, The Netherlands
SCHEDULEEach day starts at 09.00 and finishes at 17.00hrs.
REGISTRATIONhttp://www.energy-expert-network.com/coursesE-mail: [email protected]:+46 (0) 85 333 2599
FEESEarly Bird 1990€ (register before 29 August) + Dutch VATStandard price 2490€ + Dutch VAT
MULTIPLE REGISTRATION DISCOUNTRegister two or more people from the same companyand get a 10% discount per person.
FOOD AND BEVERAGEFood and beverages will be provided to theparticipants during the day. Specific wishes can besubmitted to the organization.
LAPTOPProvided the character of the workshop participantsare required to bring a laptop, which has installed MSExcel.
DOCUMENTATIONParticipants receive documentation, calculations andexercises in a manual.
ABOUT THE ORGANIZERS
ENERGY EXPERT NETWORKThe Energy Expert Network is a network of experts and hands-on energy market participants that provides companies with tailored courses.
The Energy Expert Network consists of the ‘best of the best’ industry experts, well known for their knowledge and experience in teaching energy industry professionals. Energy Expert Network also provide open courses on fixed dates in co-operation with external experts.
