Advanced Derivatives Pricing, Hedging and Risk Management - DPH3 

CPE Credits Awarded: 16
Categories: Trading, Derivatives, Hedging and Risk Management, Global Association of Risk Professionals (GARP) Approved Course

Course Date Duration Venue Price Registration Deadline Register
01 Apr 2020 2 Days Singapore, Singapore Country: sg
$ (USD) 3,100.00+7%GST
14 Feb 2020
09 Jun 2020 2 Days Houston, TX Country: us
$ (USD) 2,471.00
8 May 2020
14 Oct 2020 2 Days Singapore, Singapore Country: sg
$ (USD) 3,100.00+7%GST
28 Aug 2020
26 Oct 2020 2 Days Calgary, Canada Country: ca
$ (USD) 2,471.00+5%GST
25 Sep 2020
08 Dec 2020 2 Days London, UK Country: gb
£ (GBP)2,350.00+20%VAT
6 Nov 2020


Advance Derivatives Markets, Hedging, and Risk Management is a two-day instructor led course presented by the energy training experts at Mennta Energy Solutions. This highly applied and practical energy training course is designed for energy risk practitioners interested in enhancing their knowledge of best practices in valuation, hedging and risk management of derivatives portfolios.

Delegates are introduced to the most commonly used derivatives pricing models in energy trading organizations such as closed-form solutions and Monte Carlo simulation. The main price processes for energy risk analysis such as Geometric Brownian Motion and Mean-reverting models are illustrated with pricing and risk analysis examples.

This advanced trading course builds on the concepts introduced in DPH1 and DPH2 and explores advanced strategies used to price, hedge and manage the risk of derivatives in leading energy trading organizations. Delegates learn about the practical applications of the models and strategies from the point of view of users of those models, not the quantitative developers.

Advanced market risk management topics such as marginal VaR analysis, backtesting VaR models and Extreme Value Theory (EVT) as well as risk risk metrics such as Earnings at Risk (EaR), Cash Flow at Risk (CFaR) and Economic Capital are covered with practical examples. Several case studies illustrate how to set an effective system of risk limits and risk-adjusted performance measurement.

DPH3 also covers best practices in counterparty risk management. Metrics such as Potential Future Exposure (PFE) and Credit Valuation Adjustments (CVA) are introduced in the context of contract valuation and risk charges.

This highly interactive workshop uses current case studies, Excel exercises and group discussions to reinforce the concepts presented in the lectures.

Please note: a laptop and up-to-date version of Office would be an advantage in order to engage in market data; however it is not essential.


Recommended prerequisites: DPH1, DPH2

Not sure if you have the appropriate experience? Click here to test yourself on the knowledge necessary for this course.


  • Market risk managers
  • Energy traders
  • Trading managers
  • End-users of derivatives in corporations
  • Credit risk analysts
  • Risk consultants
  • Risk and audit committee members
  • CFOs and treasury managers
  • Finance department personnel
  • Compliance managers
  • Middle and back-office personnel
  • Treasurers and treasury analysts
  • Chief risk officers


301: Energy Price Behaviour: Overview of spot price models

  • Spot price models for energy and commodity markets
  • Understanding price processes and parameter calibration
  • Geometric Brownian motion (GBM) and Mean reversion
  • Case Study: Simulating prices with GBM and a mean-reverting process in Excel.
  • Jump diffusion with mean reversion (MRJD) processes

302: Introduction to Derivatives Pricing Models

  • Mark-to-market vs. mark-to-model. Conceptual Interpretation.
  • Review of IFRS 7/9 and three ‘fair value’ levels. Adding the liquidity dimension
  • Closed-form solutions (formulas). Case Study: Pricing Options using Black 76 in Excel.
  • Case study: How to perform hundreds of simulations for risk analysis in any existing spreadsheet in Excel
  • Implied Volatility. Skews and Surfaces. Delta and moneyness surfaces  
  • Case Study: Bank of Montreal Natural Gas derivatives mispricing
  • Monte Carlo simulation based models. Pricing an Average Price Option.
  • Binomial and trinomial trees. Case Study: Pricing an American option.
  • Counterparty valuation adjustments (CVA) and liquidity adjustments (bid-ask)

303: Energy Price Behaviour: Overview of forward curve models

  • Forward curve behavior in oil, gas and power markets
  • Review of spot price models: GBM, GBM w/ MR, MRJD
  • Multi-factor and multi-commodity models: Structured Monte Carlo (Cholesky-based) vs. Principal component analysis (PCA).
  • Excel exercises with PCA and Structured Monte Carlo Simulation.
  • Case study: Designing stress tests with Principal Component Analysis (PCA)
  • Seasonality and Forward Curve Simulations

304: Value at Risk Methodologies

  • Review of probability and statistics for VaR analysis
  • Variance-covariance, delta-normal or Riskmetrics VaR
  • Historical Simulation
  • Monte Carlo Simulation
  • Step by step calculation in Excel
  • Pros and cons of the different methodologies

Day 2

305: Enterprise Risk Management and Key Risk Indicators (KRIs)

  • Enterprise Risk Management and Risk Metrics
  • Earnings at risk, Cash Flow at risk and Gross Margin at risk for multiple maturities
  • Margin-at-risk calculation and liquidity risk management
  • Excel Case study: Multi-step Earnings at Risk calculation for an energy producer
  • Economic capital and RAROC
  • Case Study: Calculation of economic capital and pre-trade risk charges

306: Counterparty Risk Management

  • Counterparty risk trading in energy trading
  • Current Exposure, Expected Exposure vs. potential future exposure
  • Potential exposure and the role of margin, collateral and settlements.
  • Excel case study: Calculating PFE for Commodity Swaps and Physical Forwards
  • Counterparty Valuation Adjustments (CVA)
  • Counterparty VaR and dynamic potential exposure. Adding default probabilities.
  • Using CVA and PFE to set counterparty limits and credit charges

307: Advanced Market Risk Management for Energy Trading

  • Case study: How to game VaR
  • Overcoming known problems with VaR models
  • Introducing Volatilities as Risk Factors
  • Advanced Historical Simulation (HS): EWMA HS and Volatility-Updated HS
  • Marginal VaR analysis: Applications for Hedging and Risk Management
  • Backtesting VaR models: Statistical tests
  • Tail “heaviness” and Tail “asymmetry”: ETL and other Risk measures.
  • Extreme Value Theory VaR and ETL
  • Integrating stress tests into the tail analysis.

308: Advanced Valuation topics and volumetric risk pricing and hedging

  • Pricing options with volatility surfaces
  • Step by step calculations with delta and moneyness surfaces
  • Skew-adjusted delta and gammas
  • Implied volatilities and implied price distributions
  • Stochastic volatility models in commodity markets
  • Valuation and hedging of exposures with volumetric risk: Understanding Gamma risk
  • Introduction to Least-squares Monte Carlo
  • Excel case study: Pricing an American option with the Longstaff-Schwartz method


DR CARLOS BLANCO is an expert in energy, commodity, and financial risk management and modeling. He has been a faculty member of Mennta Energy Solutions since 2004, where he teaches the Derivatives Pricing Hedging and Risk Management Certificate Programme as well as courses on Counterparty Risk Management and Gas and Power Trading and Risk Management.

He has published over 100 articles on financial, energy, and commodity trading, hedging and risk management. He is the founder and managing director of a risk management advisory firm with clients in North America, Europe, Africa and Asia. Carlos is a former VP, Risk Solutions at Financial Engineering Associates. There, he worked over six years as an essential contributor in the development of the energy derivatives valuation and risk management models of the firm. He also provided leading-edge risk advisory and educational services to over 500 energy and commodity trading firms and financial institutions worldwide. He also managed the world-class support and professional services department within the firm. Prior to FEA, Carlos worked for a hedge fund in the Midwest and an asset management firm in Madrid, Spain. He is a former regional director of the Professional Risk Managers’ International Association (PRMIA).


“Great course which did a good job of explaining advanced and complex topics into easy to understand terms.” M.B., Terasen Gas

“Carlos is a great instructor.  Very knowledgeable and an excellent teacher.  He makes the concepts clear and easy to follow.” A.S., Northwest Natural

GARP rgbMennta Energy Solutions is registered with GARP as an Approved Provider of Continuing Professional Development (CPD) credits. Mennta Energy Solutions has determined that this program qualifies for 16 GARP CPD credit hours. If you are a Certified FRM or ERP, please record this activity in your Credit Tracker at

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Mennta Energy Solutions (formerly The Oxford Princeton Programme, Inc.) is not affiliated with Princeton University, Oxford University, or Oxford University Press.