Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Individual study plan of students of doctoral study at IES (Fill electronically, submit signed form to the secretariat of IES, put the file to your web page.) Student’s data Name and surname Year of beginning of studies Form of studies Advisor’s name Title of dissertation Tomáš Vyležík 2009/2010 Full-time Prof. Ing. Karel Janda M.A., Dr., Ph. D. Financial Derivatives in Energy Markets Planned harmonogram of examinations (code/title/semester) 2009/2010 WS: ELBF – Economics and Law in Banking and Finance SS: ELBF – Economics and Law in Banking and Finance 2010/2011 WS: ELBF – Economics and Law in Banking and Finance SS: ELBF – Economics and Law in Banking and Finance 2011/2012 WS: ELBF – Economics and Law in Banking and Finance SS: ELBF – Economics and Law in Banking and Finance SS: State doctoral exam 2012/2013 WS: ELBF – Economics and Law in Banking and Finance WS: Pre-defense SS: ELBF – Economics and Law in Banking and Finance SS: Defense Planned harmonogram of teaching (code/title/semester) Teaching 2009/2010: WS: JEB008 Mikroekonomie II SS: JEB007 Mikroekonomie I Teaching 2010/2011: WS: JEB008 Mikroekonomie II SS: JEB007 Mikroekonomie I Teaching 2011/2012: WS: JEB008 Mikroekonomie II SS: JEB007 Mikroekonomie I Teaching 2011/2012: WS: JEM003 Advanced Microeconomics I SS: JEM013 Microeconomics A II Work on dissertation Synopsis (1- 2 pages) Financial derivatives have already proved to be useful and largely employed instrument in the petroleum, natural gas or electricity industry. Since deregulation of energy markets has taken a radical turn in the recent past, these instruments are essential in preventing from large financial losses in the energy environment that going through monumental changes. Moreover, significance of derivatives was further stressed by sustainable increase of both oil and gas prices during the last years that evoked even higher applicability of these over-the-counter or exchange traded financial instruments by energy companies. Despite the fact that the value financial derivatives is usually determined by the value of physical commodities or financial securities used as underlying assets, there exist also special kinds of derivatives that do not have the value based on the price of an underlying asset. Because these non-traditionally priced instruments are still a relatively new product, they are usually used only rarely, especially in Europe. A typical example of this kind of instruments is a weather derivative that has weather, which is not traded, as its underlying. Every successful application of these new instruments, which are generally applied in the U.S., therefore discovers new space for potential financial benefits within energy markets. Derivatives generally serve as instruments of transferring risks to those that are willing and able to bear it. The most commonly employed function of derivatives in energy markets is hedging of price risk. Even the appearance of derivatives in energy markets was due price uncertainty that had crept into newly competitive markets within the 90s. Hence, the company with energy-price risk takes a position in a derivative instrument, e.g. swap, option or future, that gives an equal and opposite financial exposure to the underlying physical position to protect against major adverse price changes. Companies are continuously trying to disclose the best possible practices in identifying, measuring, monitoring, and controlling risks, which would facilitate efficient application energy derivatives in their hedging strategies. Derivatives should be therefore properly appointed in the way that highly corresponds to company’s needs. Different valuation models are applied, including both traditional and modern manners, in order to help to design the most favourable instruments. This greatly helps, considering also the structure of a given market, in making the decision on potential hedging occasions. Beside price risk, there exist also several other contingencies where risks in energy may occur. With ongoing deregulation, application of derivatives also in new and uncommon spheres of interest could largely limit threats of potential financial losses of energy companies. One of the main opportunities was brought by so called weather derivatives that cover potential risks linked to changeable weather. These instruments, which protect from both one time weather events and adverse weather conditions in a longer term, were used for the first time in the U.S. during the 90s. Because weather derivatives are still quite young instruments, just few information on them are attainable yet, especially in the Czech Republic. For that reason, analysis of the potential of weather derivatives in the Czech market should be beneficial. In my future research, I would like to identify relevant fields where risks in energy markets occur. A sound analysis of conditions in the Czech energy markets is fundamental in order to identify areas where the implementation of hedging with derivatives could be profitable. Pros and cons of various derivatives’ designs and appropriate valuation methods, which would precisely reflect needs in the Czech energy markets, will be revealed in my further postgraduate research. This should help companies to discover feasible and profitable opportunities, in which could be employed standard or non-standard sorts of derivatives. My survey will be therefore addressed not only to the traditional fields where derivatives are already being used, but also to some deprived areas of energy markets, in which these instruments have not been implemented yet. To these challenges belongs also one of the most important tasks in energy industry for the future, which consists in protecting against financial effects of adverse behaviour of weather. Basic literature Alaton, P. (2002): On Modelling and Pricing Weather Derivatives. Fat Tails Financial Analysis AB, Stockholm. Buckley, N.; Hamilton, A.; Harding, J.; Roche, N.; Ross, N.; Sands, E; Skelding, R.; Watford, N.; Whitlow, H. (2002): European Weather Derivatives. Working paper. Clewlow, L. and Strickland, C. (2000): Energy Derivatives. Pricing and Risk Management. Lacima Publications. de Joode, J.; Kingma, D.; Lijesen, M.; Mulder, M.; Shestalova, V. (2004): Energy Policies and Risks on Energy Markets – A cost-benefit analysis, ISBN 90-5833-161-X. Eydeland, A. and Wolyniec, K. (2003): Energy and Power Risk Management. New Developments in Modeling Pricing and Hedging. Wiley. Garman, M.; Blanco, C.; Erickson, R. (2000): Weather Derivatives: Instruments and Pricing Issues. 2000. Hull, J. C. (2003): Options, Futures and Other Derivatives. Prentice Hall. Jouini, E., Cvitanic, J. and Musiela, M. (2001): Option Pricing, Interest Rates and Risk Management. Cambridge U. Press. Nelken, I. (2000): Weather Derivatives – Pricing and Hedging. Super Computer Consulting, Inc. Ruck, T. (2001): Hedging Weather Risk for Improved Financial Performance. Energy Koch Trading LP. Sturm, F. J. (1997): Trading natural gas: cash, futures, options and swaps. PennWell Publishing Company. 1997. Turvey, C. G. (2001): The Pricing of Degree-day Weather Options. Agricultural Finance Review, 2005, vol. 65, issue 1, pp. 59 – 85 West, J. (2002): Benchmark Pricing of Weather Derivatives. University of Technology, Sydney. Zeng, L. (2000): Weather Derivatives and Weather Insurance: Concept, Application, and Analysis. Risk Analysis and Technologies, E. W. Blanch Company, Minneapolis. Harmonogram of works 2009/2010 Work on the first dissertation paper with expected name “Weather Risk in the Czech Gas Market“ Submission of a 3-year grant to Grant Agency of Charles University with the topic “Hedging Risks in Energy Markets“ (no other member in the team applying for the grant). 2010/2011 Work on the second dissertation paper with expected name “Hedging Risks in the Czech Natural Gas Market” Solving of 3-year grant or, if the grant was rejected in the previous year, submission of a new one. 2011/2012 Finishing the dissertation with the third paper with expected name: “Application of Financial Derivatives in Energy Markets” Solving of grant 2012/2013 WS: Pre-defense Finalization of grant SS: Defense Planned publication of results 2009/2010 WS: Submission of paper based on the diploma thesis with the expected name “Changes in the Natural Gas Market” to IES WP. The paper will be co-authored with the consultant of the diploma thesis Tomáš Václavík. SS: Submission of “Changes in the Natural Gas Market” to the EconLit journal. In the case of very positive evaluation of the WP version, we are planning to submit the paper first to Energy Economics journal (5year IF = 2.726), in the case of rejection in this journal or less positive evaluation of the WP, we are going to send the paper to Energy Studies Review or Journal of Energy and Development (both EconLit without IF). The next step in our submission tree is Prague Economic Papers. SS: Submission of paper based on the rigorous thesis with the expected name “Weather Risk in the Natural Gas Market” to IES WP. The paper will be co-authored with the consultant of the diploma thesis Tomáš Václavík. 2010/2011 WS: Submission of “Weather Risk in the Natural Gas Market” to the EconLit journal. In the case of positive evaluation of the WP version, we are planning to submit the paper first to Resource and Energy Economics journal (5year IF = 2.032) or, in the case of rejection or less positive evaluation, to Resources Policy journal (5year IF = 0.962). The next step in the submission tree is Prague Economic Papers. SS: Submission of paper with expected name “Hedging Risks in the Natural Gas Market“ to IES WP 2011/2012 WS: Submission of paper “Hedging Risks in the Natural Gas Market“ to EconLit journal. In the case of very positive evaluation of the WP version, we are planning to submit the paper to Energy Policy journal (5year IF = 1.872). WS: Submission of paper with expected name “Application of Financial Derivatives in Energy Markets“ to IES WP. SS: Sending of paper “Application of Financial Derivatives in Energy Markets“ to EconLit journal. In the case of very positive evaluation of the WP version, we are planning to submit the paper to Energy Policy journal (5year IF = 1.872). Concretization of study plan for 1st year of study Teaching Participation at doctoral seminars Beginning of work on dissertation Planned examinations Other activities Work on dissertation: Work on the first paper with expected name: “Weather Risk in the Natural Gas Market“ Planned publications: WS: Publication of IES WP with expected name “Changes in the Natural Gas Market” written on the basis of diploma thesis. SS: Submission of “Changes in the Natural Gas Market” to the EconLit journal with the submission tree mentioned in the previous section. Teaching 2009/2010: WS: JEB008 Mikroekonomie II SS: JEB007 Mikroekonomie I Doctoral seminars: WS: ELBF – Economics and Law in Banking and Finance SS: ELBF – Economics and Law in Banking and Finance Planned grant activities: Submission of a 3-year grant to Grant Agency of Charles University with the topic “Hedging Risks in Energy Markets“ Other activities: WS, SS: Participation in defenses (at least 50%) Advisor’s evaluation ………………………………. Advisor’s signature ………………….……........ Student’s signature