Real Options

Amsterdam, The Netherlands
Fall 2016

This is a practical, hands-on course in Real Options, which we ve constructed to be within the grasp of non-mathematical experts.

We designed this two day course specifically to instruct participants in the areas of outright, embedded and real options, physical assets, hedging future cash flows of assets, optimization of allocation of assets, flexibility, pricing of options, valuation of real options and Greek variables as indicators for sensitivities.

The course is about real options and while statistics are important in this area of expertise and there is a bit of mathematics in the course material, in this course things are explained so that everybody will be able to understand, regardless of their mathematical abilities. This does not affect 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 objectives

Acquiring insight and knowledge of:

* Option and options theory

* Options valuation and valuation of physical assets

* Scenario analysis

* Sensitivity analysis of cash flows

* Greeks variables


Who should attend?

This program was specifically developed for Traders, Asset & Portfolio managers, Quants, Risk managers and Analysts, but more it is also suitable to and helpful for:

* Front, Mid and Back office staff

* Originators

* ICT experts and Project managers

* Legal staff and Compliance officers

* Staff of the Finance department

* Controllers and Accountants


Agenda day 1:

Session 1:

Options Fundamentals

Call & put options


   Strike price

   Options style

      American, European & Asian Style, and more

      Plain vanilla versus Exotic options


   Outright options

   Embedded options

   Real options

Flexibility as option

   1-sided right vs. 2-sided obligation

   The real options approach


Session 2:

Option valuation

Valuation models

   Black & Scholes

   Binomial models

Disadvantages of models

   Assumptions do not represent real life


   Skewness Tail risk

   Volatility smile

   Positive skew

   Negative skew



   Height of the mean

Impact on options premiums

   Volatility curve and smile



Calculation of option value via binomial tree

Calculation of option value with normal distribution

Calculation of option value with log-normal distribution

Calculation of option value with skew


Session 3:

Power plants as real options

Power plants as sequence of call options on the spark spread

Asset-backed trading

   Spark spread optimization

   Delta hedging

   Strategy to lock in

   Dynamic hedging

   Objective approach

   Subjective approach


   Value of real option

      Time value

      Intrinsic value

      Volatility of the spark spread



Power plants as real options


Session 4:

Gas storages as real options

Gas storage

   Sequence of time-spread options

Locking in the value of the gas asset

   Hedging process

      Setting up hedge

        - Choose amount/significance

      Unwinding hedge

        - Choose significance

      Repeat sequence

      Timing as critical element

      View on the market


Exercise: Gas storage valuation

Simulation: Trading simulation to lock in and optimize asset value

Excel: Option with 2 legs, 2 prices & 2 volatilities


Agenda day 2:


Session 5:

Transport capacity as real options

Gas/Power transport capacity

   String of location-spread options

Basis trading

   Trading the basis


Session 6:

Greek variables

Sensitivity analysis

   Delta; What is it? What is its interpretation? How to apply to assets?

   Gamma; What is it? What is its interpretation? How to apply?

   Vega; the impact of volatility

   Theta; premium decay over time

   Rho; interest rate sensitivity

Scenario analysis versus sensitivity analysis

Combined reporting



Trading options & managing flexibility in portfolios


Session 7:

Managing Greeks in large portfolios   Part 1

Overview of all Greeks

Combining this overview with scenario analysis

Steering exposures by doing transactions

   What deals are required or preferable?



Greeks management for an energy portfolio of an energy producer.

Power options


Session 8:

Managing Greeks in large portfolios   Part 2

Management of an integrated portfolio of options

   Calculate (or estimate) the Greeks

   Create a matrix which incorporates both:

      Scenario analysis, and

      Sensitivity analysis


Analysis of a portfolio of power options



Early Bird price: 2090 EUR + 21% VAT (register before 6 August)

Standard price: 2390 EUR + 21% VAT

Multiple registration discount: Register two people from the same company at the same time and receive an additional 10% discount.

To request the full brochure, click here

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