Credit Risk in Energy Trading for Non-Practitioners
Level I: Introduction to counterparty, market and liquidity risk in commodities and derivatives
AFTER LEVEL I:
Participants will gain a foundational understanding of credit risk within an energy trading business. They will demonstrate familiarity with key terminology, confidence to raise relevant questions and to engage in credit-related conversations with experienced risk professionals.
WHO SHOULD ATTEND:
- System vendors, developers, legal teams, trade-finance specialists and professionals supporting energy trading.
- Practitioners new to energy trading.
- Analysts, client-facing consultants, sales and account executives, directors, C-suite leaders and board level.
Session 1: Counterparty Risk in Energy Training
TRAINING OBJECTIVES:
- Articulate what Risk means in the context of energy trading.
- Distinguish between market, credit and liquidity risk.
- Understand how key risk metrics are applied by practitioners.
09:15 INTRODUCTION
09:30 RISK MANAGEMENT
Case Studies:
- Default: How credit, market and liquidity risk manifest in a collapse.
- Downgrade events and how the five elements of credit risk interact: Ratings, limits, exposures, risk mitigation, and credit pricing.
- Risk mitigation: Margining, letters of credit, guarantees from parents, credit insurance, credit default swaps, clearing, margining.
Session 2: Credit risk exposure
TRAINING OBJECTIVES:
- Identify how counterparty reference data influences risk metrics.
- Estimate how credit exposure metrics respond to changes in prices or reference data.
11:00 COFFEE BREAK
11:20 CREDIT EXPOSURES WORKSHOP
- Applied example: Calculate current exposure in a baseload electricity physical or gas forward contract
- Scenario analysis: Explore stress testing and potential future exposure (“PFE”).
12:45 SUMMARY
- Walk through learned concepts.
PURPOSE:
- Review and consolidate key concepts covered.
- Assess participant’s ability to apply concepts to practical scenarios.
13:00 TEST
- Attendants will respond to 10 questions.
- Participants will complete a feedback form.
13:30 LUNCH - END OF THE COURSE